|
| Short-term outlook bearish |
| Devangshu Datta / New Delhi Aug 09, 2009, 23:59 IST |
|
If Nifty closes below 4,400, it is likely to slide till 4,250.
The market hit a 2009 high and then reversed direction with startling suddenness. On Wednesday, the Nifty was hovering at 4,731 points. It closed on Friday at 4,481.4 points, down 3.3 per cent week-on-week. The Sensex was down 3.25 per cent at 15,160 points while the Junior was down 2.95 per cent. The Defty lost less ground (down 2.7 per cent) as the rupee hardened to an annual high.
Breadth was reasonable in the sense that a wide variety of shares were traded. It was poor in the sense that advances were outnumbered by declines. Volumes were good in both cash and derivatives but dropped on the last two sessions during the sell-off. The broader BSE 500 was down 3.05 per cent while the Midcaps saw a fall of 3.75 per cent.
Outlook: This is certainly a bearish short-term outlook. However, it’s more difficult to call the intermediate trend. Momentum indicators are down and the market is likely to test support between 4,400-4,450 again. If it closes below 4,400, it’s likely to slide till 4,250. Below 4,250, the next support is 4,100.
Rationale: Below 4,250, the market will have performed a pattern of lower lows. That would suggest a break in the intermediate trend. However, the intermediate trend has only been up since mid-July and three weeks is a minimal period for a trend to be defined as “intermediate”. A normal retracement should end with a low of about 4,425 and leave the intermediate uptrend alive. On the upside, any bounce will have to beat 4,731 (higher highs) to confirm the revival of the uptrend.
Counter-view: There is a chance that the market will go into a period of range-trading between 4,400-4,700 before it decides on direction. Whatever happens, volatility is likely to be high. The prudent trader would be braced for moves between 4,250-4,700 with an initial downward bias.
Bulls & Bears: The past two sessions saw most stocks losing ground. FIIs were heavy sellers and the domestic retail presence was also muted though domestic institutions did buy. Many stocks were still some distance from reliable support and may have further downsides.
The IT sector displayed surprising strength and the CNXIT outperformed the major indices despite rupee-hardening. The Bank Nifty lost disproportionate ground. Auto and realty stocks were also big losers. There was some revival of interest in sugar scrips as well as some support for energy exploration plays like Hind Oil and Aban. Financial service providers like Indiabulls and India Infoline also generated high volumes.
Any revival is likely to be led by the banking and realty stocks. One crude way to judge the potential upside in a specific stock may be to look at the distance from the highs of August 5, (when many scrips hit 2009 highs). Similarly a crude judgement about the downside could be made by judging the distance from the lows of July 13 (when recent bottoms were hit).
MICRO TECHNICALS
HDIL
Current Price: Rs 254
Target Price: Rs 240
The stock has seen a pattern of heavy selling in the past three sessions. It has reliable support only around Rs 235-Rs 240. Keep a stop at Rs 258 and go short. Cover below Rs 242. Consider reversing the position below Rs 240 because it could bounce back till around Rs 260.
Balrampur Chini
Current Price: Rs 120.7
Target Price: Rs 130
The stock made a breakout when it closed above Rs 113 on high volumes. It has a potential target of around Rs 130 or more – making projections is difficult since it’s at a 2009 high. Keep a trailing stop at Rs 117 and go long. Move up the stop 5 points for every 10 point gain.
Hind Oil Exploration
Current Price: Rs 181
Target Price: NA
The stock has shot up on massive buying despite the general market downtrend. It’s impossible to set a target with this sort of vertical move and there is also the danger of sudden sharp retracement. Keep a trailing stop at Rs 175 and go long. Move the stop up 10 points for every 10 point upmove.
Indiabulls
Current Price: Rs 190.1
Target Price: Rs 175
The stock has seen heavy selling that has already pushed the price back down from Rs 215. It has reliable support only at around Rs 175-180 and it is likely to drop into that range and consolidate. Keep a stop at Rs 195 and go short.
Tata Power
Current Price: Rs 1,232.95
Target Price: Rs 1,305
The stock made a breakout from Rs 1,220 and hit highs above Rs 1,350 before pulling back close to the point of breakout. It should consolidate here and make another upmove till Rs 1,300-1,310. Keep a stop at Rs 1,220 and go long.
|
|
|
|
|
|
|
|
|
|
 Read Business news in |  |
|
|
|
|
|
|
Advertisements |
|
|
|
|
|
|
|
|
|
Content Guide
