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Data Nov 12, 2012

Chart: Get ready for Nifty's journey towards 6,000

Special to Firstpost

S&P CNX Nifty (5,686.25): After a sharp rally on Wednesday, the market sentiment turned sour in the next couple of trading sessions, courtesy the weakness across global markets and the disappointment post the State Bank of India's Q2 earnings. The Nifty as a result has gotten back to the prior trading range of 5,630-5.730.

The short-term outlook remains bullish and a rally to the immediate target of 6,000 remains the preferred view. A breach of the recent low of 5,580 would indicate that the index is still in a downward corrective phase and may subsequently slide to 5,450-5,500.

Even if the index were to test the 5,450-5,500 range, it would not have any bearing on the medium-term bullish view. It is just a question of time before the journey to 6,000 commences.

From a trading perspective, long positions may be considered in the Nifty at or near 5,630, with a stop loss at 5,565, for a target of 6,000 - basis the spot price.

CNX Bank Index (11,475.60): Similar to the Nifty, this index too did nothing during the week gone by. The sentiment towards the banking sector took a knock on Friday after industry heavyweight - State Bank of India reported a relatively disappointing set of numbers. The crack in this index was instrumental in pushing the Nifty down on Friday.

The short-term outlook for the index remains bullish and a rally to 12,200 is the favored view. The bullish view would warrant a reassessment only if the bank index falls below the recent swing low of 11,100.

A fall below 11,100 would be a sign that a deeper correction is underway and the index could then slide to the major support at 10,650-10,700. Given the positive medium term view, investors may use weakness to build long positions in the frontline banking stocks.

Tata Steel (Rs 390.55): After a minor consolidation, the stock cracked sharply on Friday. The inability to clear the resistance at Rs.404-406 range along with bearish outside-day-reversal bar on Friday is a sign that the stock has resumed its recent downtrend.

Chart

Shareholders may pare exposure. Traders may consider short position on a minor pull-back with a stop loss at Rs.409, for a target of Rs.360, basis the spot price. A fall below Rs.360 could trigger further weakness and may push the stock to the major support at Rs.344.

Finance Technologies (Rs 1,095.65): The sequence of higher highs and higher lows recorded since June 1 is a sign that the stock is in a steady uptrend. The short-term outlook is bullish and chart patterns suggest that the stock could rally to the immediate resistance at Rs 1,250.

Long positions may be considered at the current levels as well as on weakness, with a stop loss at Rs 1,020 for a target of Rs 1,250. The uptrend would gather momentum on a breakout past Rs 1,250 and the stock could then rally to the major resistance at Rs 1,400.
(The views and recommendations featured in this column are based on the 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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