The downfall that took place during the week was quick and unforgiving. The software stocks took a big battering. Most part of the rally that had taken place over last couple of days simply lost its fizz and the index continued to go its downward journey.

The bullishness in the market was short-lived and the euphoria has gone for the toss. Over last three days of horrendous trading, the index has lost close to 500 points from the high of Tuesday. The market took a huge downturn after showing initial signs of recovery. But if someone is watching the market very closely it will be noticed that the market is primarily going down due to hammering in Satyam, Zee, Infosys and NIIT.

The combined weightage of these three stocks in the Sensex is around 30 per cent and once these stocks get hammered the index does get really clobbered. The factors that are again responsible for the downfall in the index values are dip at the Nasdaq, fall in the value of the rupee against the US dollar and the precarious drought situation in the country. But again falling the value of the rupee should boost the revenue of the rupee this should be very important to the software companies. But the market hardly offers any reasoning to the logic and what drives the markets are sentiments.

Last week, we were bullish on the market once the index broke above the level of 4805 points. But this week we were absolutely wrong on the market. The index continued to decline at an absolutely ferocious pace. The series of bullish patterns that were talked into last time were altogether run down by the sustained downtrend in the index.

The week's trading formed a long black candle. This is a bearish sign. On the daily charts the index has also seen a series of black candles which are bearish in nature. But on the weekly chart, the low of the previous week low and the low of this week was nearly at the same level. This means that the index the `tweezers bottom'.

The index is now hovering just above the 61.80 per cent retracement of the move from 2140 points to the high of 6152 points. The precise reading of this retracement comes to around 4043 points. The index is just above this retracement level.

The level of 4043 points is the next crucial support level for the index and it should hold failing which the index could decline to around Rs 3675 points. The forthcoming week should be very crucial for the index the behaviour of the index could help in anticipating the future movements of the index.

For the time being it is very difficult to say if the index has indeed seen a bottom or not. Too much bearish news does not necessarily mean that the market may indeed go down. After all there have been many occasions in the past when the index has rallied even when there were no logical reasons for a rally to materialise.

The supporting indicators are in their oversold zones. The 14-day RSI( Relative Strength index) is just around the level of the bottom of November 99. The MACD (Moving Averages Convergence Divergence) has gone under its trigger line and it has moved below the equilibrium level. The index has a strong support around the level of 4045 points. If the index breaks below this then there could be decline in the value of the index.

Nestle:
The price of this stock is moving in a range of Rs 341 to Rs 397. There is a small inverse head and shoulder pattern that is seen at the bottom, which is more visible on the daily charts.

The price may see a rally to higher levels once it breaks above the level of Rs 345. One may consider buying this stock only on breakout form the level of Rs 345 for a target of Rs 400. If the price manages to break above this level it may rally to around Rs 440. One may buy on breakout with a stop loss below Rs 310.

Smithkline Consumer:
The price of this stock has just started to move up on increased volumes. The price faces a very strong resistance at the level of Rs 353. One may consider buying once the price moves up above the level of Rs 353. The price may see a rally to around Rs 425 in the intermediate term. One may buy the stock on breakout with a stop loss below Rs 325.

HDFC Bank:
The price of the stock is steadily moving up notwithstanding severe decline in the index. The price may see a rally if it breaks above the level of Rs 274. Once above this the price may rally to around Rs 325 in the intermediate term. One may consider buying this stock on break above the level of Rs 274 and keep a stop loss below Rs 253.

Larsen & Toubro:
The price of the stock may see a rally if it breaks above the level of Rs 227. The price could rally to around Rs 255 if the breakout is sustainable. One may buy on breakout. Keep a stop loss below Rs 219.

Reliance Industries:
The price of this stock may see a decline to lower levels if it breaks below Rs 310. On break below Rs 310 the price may see a decline to around Rs 294. One may sell on breakout with a very close stop loss above Rs 317.

-- (The writer's e-mail address is at shahmani1@yahoo.com)