by R Jagannathan Aug 18, 2012 11:22 IST
Special to Firstpost
S&P CNX Nifty (5,366.30): The Nifty index continues to struggle after the breakout past the resistance level at 5,270-5,300. The absence of follow-up buying by the bullish camp is a cause of concern. A look at the attached daily chart above of the Nifty indicates that the middle green line is acting as a strong resistance.
A breakout past this line would suggest that the residual sellers have been wiped out and the stage would then be set for a rally to the next target of 5,650-5,700 range. While it would make sense to wait for a breakout before taking long trades, there is no compelling technical reason to short the Nifty unless the support at 5,250 is breached.
Given this backdrop, it would make sense to wait for the price to give us clues about its intentions, rather than second-guessing what is likely to transpire. As observed in prior weeks, individual stocks offer compelling trading opportunities while the Nifty is still groping for direction.
Investor interest seems to be perking up in mid-cap stocks and it would be advisable to await a correction and take exposures in stocks that are in an uptrend. The likes of Dishman Pharma, IDFC, Balrampur Chini, Everest Industries and McLeod Russel are the ones that top the list of candidates that can be traded from the long side.
CNX Bank Index (10,417.90): This index did a whole lot of nothing during the week gone by. Most of the index heavyweights were stuck in a trading range, resulting in a lacklustre activity in the Bank Index. The index has to move past 10,800 to indicate the scope for a further rally.
As long as the index trades below 10,800, there would be a strong case for testing the support level at 9,800. In the banking universe, the outlook for HDFC Bank remains bullish while State Bank India is delicately poised just above its crucial support level of Rs 1,800-1,830. A recovery from these levels could trigger a 10 percent rally in State Bank.
Hindustan Unilever (Rs 503.40): After a minor consolidation, the stock registered a breakout on Friday. The short-term outlook is bullish and a rally to the immediate resistance at Rs 540 appears likely.
Long positions may be considered with a stop-loss at Rs 480, for a target of Rs 540. The uptrend would gain momentum on a breakout past Rs 540 and a subsequent move to Rs 565 may materialise.
Century Textiles (Rs 321.60): After a sharp run-up in the past few days, the stock closed on a weak note on Friday. The inability to get past the crucial resistance level of Rs 340 is a sign of weakness.
The short-term trend is bearish and the stock could test the immediate support at Rs 300. Short positions may be considered with a stop-loss at Rs 335, for an initial target of Rs 300. A fall below Rs.300 would push the stock to the major support at Rs 280.
(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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