The loss in the index values is not as severe as it is made out to be. Let's explain. On June 22, 1998 the index made a low of 2951 points, on August 19 the index made a low of 2839 points and finally on October 21,1998 the index made a low of 2741 points. Thus in the span of four months the index has declined by a maximum of around 200 points if the calculations are to be considered from bottom to bottom. The problem with the market as awhole is not heavy loss in index values but it is, in fact, the lack of upside movement and the excruciatingly slow pace of the decline. The manner in which the market is behaving since about last three weeks it is very frustrating for the traders who make a living on short term trading.

Last week we had mentioned that the index is likely to show a rally if it breaks above the level of 2850 points. On Monday the index opened with a gap at 2908 points and made a high of 2920 points. In the following days a steady decline persisted. A noticeable fact is that the 'gap' that was formed on Monday has not been filled as the index has not till date closed below the gap. The lower limit for the gap is at 2798 points. Thus the 'window' has not been closed. Secondly, the index made a low of 2787 points during the week. This point was exactly equal to the low made by the index on October 13, 1998. In between these two lows is the low of 2741 points made on October, 21 1998 points. In short an ' inverse head andshoulder' pattern is in progress. The neck line of this pattern is at 2910 points. If the index registers a breakout beyond this level it could rise to higher levels. On the flip side, if the index breaks below the low of 2785 points it could decline to around 2745 points and a break below this the index could decline to around 2715 points.

The indicators show that the market is in the process of bottoming out. The 14-day RSI (Relative strength Index) is showing a series of positive divergences. The MACD (Moving Averages Convergence Divergence) has marginally moved above its trigger line giving a momentary buy signal. Though the indicators are signalling reversal the confirmation is yet to be obtained in the price. Till the time the index itself shows a reversal we cannot say for sure that the market has indeed reversed. We have been waiting for a reversal sign since last weeks. The movements of the index are indeed very dicey at the movement as most of the traders must have experienced over last couple ofweeks.

The options available with the traders are limited. Either one sits out at the moment and waits for a direction to develop or one works out for extremely small profits. To some the former option is preferable to the latter. Traders may exercise caution under the circumstances and in a highly sideways market traders may work for small and quick profits.

Raymonds: Buy on breakouts

This stock has been attracting heavy volumes in recent times. Some time back this stock showed a breakout from its down sloping 'wedge' formation. This itself is a bullish sign. The weekly MACD has flashed a buy signal. Currently, the stock is marginally below its resistance level of Rs 74. One may consider buying this stock on breakout. Keep a stop loss below Rs 65.

Indal: Go long

This stock has come out with excellent results and the effect can be seen on the price. The stock has broken above the falling trendline and it has also managed to rise above the resistance level of Rs 66. The volumes havealso shown a very heavy increase. One may consider buying this stock at current levels for a targeted price of around Rs 100. One may buy. Keep a stop loss below Rs 65.

SAB Nife Power: Bright outlook

This is one of those lesser known stocks that have shown a tendency to rally in spite of bad market conditions. The stock has been attracting heavy volumes and it has just broken above its all time high of Rs 45. One may consider buying this stock at current levels for a decent increase in price. Keep a stop loss below Rs 45.

Traders choice:

ACC Ltd: Enter long

Traders may wait for this stock to surpass the level of Rs 940 before buying into it. The stock does seem to be attractive at current levels. Keep stop loss below Rs 920.

Dr Reddys: Sell short

This stock looks weak as a long black candle appeared. Traders may sell short for a targeted price of Rs 430. Keep a stop loss above Rs 449.