Special to Firstpost
S&P CNX Nifty (5,381.60): The Nifty reversed near the resistance of 5,435 mentioned in the previous week. After the breakout above 5,400 on Thursday, the index quickly receded on Friday and closed below this level. (See Chart)
While this is not a very healthy sign, the undertone is bullish and could remain so, until the index falls below short-term support at the 5,000-mark. As emphasised in the recent weeks, is it safer to build exposure on correction or pull-back rather than chasing price.
For the short-term trader, the key levels to watch would be the resistance at 5,435 and the support at 5,200. What the price does at these short-term extremes would decide the course of action in the next few weeks.
Quite a few people were surprised and even upset over the word of caution and the views expressed last week. The anxiety of missing a big move makes most people chase price and enter at sub-optimal levels.
Astute students of history and technical analysis would realise that the price action is seldom uni-directional. Any trending move is always interrupted by a healthy counter-trend correction, providing entry opportunities. And, those still apprehensive of having missed-the-bus may increase equity allocations with a stop at 4,820.
CNX Bank Index (10,442.65): Last week’s view that the index is headed towards 11,500 remains unchanged. While the index continues to march towards its medium-term target, there are signs of a slowdown in the momentum behind the upward move.
A fall below 10,200 would be an early sign that a minor downward correction is underway and the index could then test the short-term support at 9,500. Considering that the short-term trend is bullish, price weakness may be used to build long position in the index as well as banking sector stocks.
Crompton Greaves (Rs 150.90): The sharp downward correction off the 2 December 2010 high of Rs 349 appears complete at the 22 December low of Rs 107.15. The subsequent price action confirms that the stock is in a short-term uptrend. (See chart)
Long positions may be considered with a stop-loss at Rs 130, for a target of Rs 180. A breakout past the initial resistance of Rs 180 could trigger a rally to the major resistance at Rs 192.
Gail (India) (Rs 385.75): The stock is in a short-term uptrend and the recent price action indicates that the stock could rally to the target of Rs 405. Short-term traders may buy with stock with a stop loss at Rs 365.
A move past Rs 405 would impart momentum to the uptrend and the stock could rally to the major resistance at Rs 435.
(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.)