On Friday the BSE Sensex ended the week with a close at 4218 points. The index gained a net of 90 points over the close of the previous week. The market was a bit dicey for the week, as the index assumed sideways and a narrow movement. The volatility was low and low to the point of extreme boredom. This would have been a very difficult time for the players to reap huge rewards. Decrease volumes suggesting that the big players are not interested in the market accompanied the uncertainty in the market.Most stocks including the index have formed a well-defined trading range and one could play the trading range. But psychologically the last bull market run has attuned people to taking in huge profits swings. Secondly, the folklore in the market goes that in the topline ICE stocks the price if it declined from its nearest earlier high the price usually returns to its original level.
Due to this there are a lot of people who wait on a losing position for long time and end up losing a lot of money in the bargain. The index has remained comparatively immune to the bearish news that the market has been witnessing over past couple of days.
The loss of the value of the rupee against the dollar did have a cascading impact on the prices, Though there was a decline there was no sort of panic selling that was seen in the prices. The index values remained subdued, though the sell-off was seen in the software stocks. This was due to the relative strength in the cement sector. This sector has seen a big improvement in the fancy that was in doldrums sometime back. Stocks in this sector appear to be attractive and they deserve to be looked into.
The index has formed a reversal pattern `harami' on the weekly charts. This pattern is may act as a reversal pattern provided there is some confirmation that there is a reversal in trend. The market has not reversed directions as yet and there unless there is confirmation that we cannot hope that the index could reverse.
On the last trading day of the week the index has formed a long black candle this is a sign of bearishness in the market.
The index could see a decline to around 4113-4052 points in the coming week and if there is a break, the index could still see a decline to lower levels to around 3957 points. The market is moving in atrading zone of 4324 to 4052 points and there is little evidence of buying at lower levels.
The index movement is slightly dicey and it is best that one remains very cautioned about the market. The 8-day Relative Strength Index (RSI) is in an oversold zone but it is not showing any major signs of improvement. The Moving Averages Convergence Divergence (MACD) is also in a sell mode. The indicators are not showing any signs of improvement.
The market is in a very choppy stage and there is a good chance that the software stocks may see a bit of battering in the next week. One may be very cautioned about the market as a whole.
Ranbaxy Labs
The price chart has formed a big symmetrical triangle at the bottom. The crucial breakout from this triangle is at the level of Rs 638.The price may see a rally to around Rs 700 once there is a break above the level of Rs 638. The MACD is in a buy mode on the weekly charts and there is a bullish engulfing pattern on the weekly charts. One may buy on breakout and then keep a stop below the level of Rs 600.
Ballarpur Industries
The price is just poised above its rising trendline after breaking out of falling trendline the price is poised just at the intersection of its rising and falling trendline. The price could see a rally to around Rs 80 once there is a break above the level of Rs 80 in the medium term and once there is a break above the level of Rs 80, the price could rally to around Rs 95. One may buy on break above the level of Rs 68 and keep a stop loss below Rs 60.
Grasim
The price has formed a higher bottom and this suggests that there is a good scope for the price to appreciate.
Price is just below the falling trendline and there is a good chance that the price may see a rally to around Rs. 394 in he medium term. One may buy this stock in two stages. One on break above the level of Rs 290 and second on break above the level of Rs 310. Protect with a stop below Rs 280.
Larsen & Toubro
The price could rally to around Rs 240 once there is a break above the level of Rs 215. One may buy on break and keep a stop loss below Rs 206.
NIIT: Sell short
The level of Rs 1,469 is a strong support level and if the price breaks below this it could mean that a major bottom is broken. The price may see a decline once there is a break below the level of Rs 1,469 to around Rs 1,350. One may sell short and keep a stop loss above Rs 1,500.
-- (The writers' e-mail address is shahmani1@yahoo.com)
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