Data Aug 4, 2012
Special to Firstpost
S&P CNX Nifty (5,215.70): As anticipated, the Nifty index ruled firm and also edged past the resistance level of 5,200 mentioned in the week before. The Nifty on Friday closed at a crucial level and the price action in the next few days will determine the next major move of the index.
As observed last week, a breakout past 5,270 is a prerequisite to consider the case for resumption of the medium-term uptrend. Until then, a drift to the lower end of the support at 4,900 would be the preferred view.
As highlighted in the chart, the index is now right at the down-sloping blue line which is a major trend barrier. A move above 5,270 would pave the way for a rally to 5,450 while a reversal here would strengthen the chances of a slide to 4,900.
With the index at a critical level, it would make sense to wait for the price to play its cards first and telegraph where it is headed, rather than trying to forecast the direction.
Once the price signals its intention, there will always be enough time and opportunity to participate in the subsequent move.
CNX Bank Index (10,315.60): The index very little during the week gone by. As highlighted last week, a breakout past 10,800 is required to indicate that the bearish forces have been overwhelmed. If not, a drift to the support at 9,600-9,650 appears likely.
It would be prudent to await market action in the next few days before taking trading or investment bets in the sector. A breakout past 10,800 would be a strong message that the index is headed to the major target at 12,000 while a failure at current levels would indicate that a fall to the major support at 8,900 is underway.
Jaiprakash Associates (Rs 73.35): The stock was in a strong uptrend since May. As highlighted in the chart, the stock had run into an area of resistance where the rally was been stalled last week. The short-term outlook is bearish and a slide to Rs 66 appears likely.
Investors may pare exposures or peg stop-loss closer to the price action to protect unrealised profits. Traders may consider short positions on a pull-back, with a stop-loss at Rs 79, for a target of Rs 66.
Dishman Pharma (Rs 79.90): This stock has been in a sharp uptrend in recent months. The near-term outlook is positive and the rally could extend upto the next resistance at Rs 91.
Price weakness may be used to buy the stock with a stop-loss at Rs 69, for an initial target of Rs 91. A move beyond Rs 91 would lend momentum to the uptrend and a subsequent rise to Rs 111 may not be ruled out.
(The views and recommendations featured in this column are based on a technical analysis of historical price action. There is a risk of loss in trading. The author may have positions and trading interest in the instruments featured in the column.)
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