Bull signal: Nifty on course to target 6,000 next

Special to Firstpost

S&P CNX Nifty (5,691.15): After a minor blip in the early part of week, the index recovered and closed on a distinctly strong footing on Friday. The sharp rally on Friday pushed the index past the prior high of 5,630, which is a positive sign. The breakout above 5,631 has confirmed the bullish sequence of higher tops and higher bottoms from the major swing low of 4,531 recorded in December 2011.

[caption id=“attachment_464474” align=“alignleft” width=“380”]  The breakout above 5,631 has confirmed the bullish sequence of higher tops and higher bottoms from the major swing low of 4,531 recorded in December 2011.[/caption]

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The short-term trend remains bullish and the index is on course to hit the immediate target of 5,750-5,800. The price patterns and the momentum also strengthen the case for a push to the major target at the 6,000-level. As long as the index trades above the support at 5,400, it would reasonable to expect the Nifty to hit the target of 6,000.

The shift in the preference to high-beta sectors, at the expense of defensives, has been quite apparent in the past few trading sessions. Traders may shift focus to sectors such as banking, infrastructure/engineering and real estate for a quick pop.

Any minor correction may be used to build long positions in companies such as State Bank of India, Larsen & Toubro, Reliance Infra, ICICI Bank, Bank of Baroda, IDFC and HDIL, to name a few.

CNX Bank Index (11,358.50): As anticipated last week, a positive trend prevailed and the index also moved past the bullish trigger level of 10,950. The index is now on course to hit the next target of 11,900. Public sector banks, led by State Bank of India, appear more promising from a trading perspective.

Others such as Bank of Baroda, Bank of India, Indian Bank and Andhra Bank also come across as candidates with a bullish undertone. Any price weakness may be used to buy these stocks for a quick 10 percent rally.

The bullish view would be under threat only if the index falls below the support at 10,300.

Larsen & Toubro (Rs 1,585.25): This stock, featured in this column a couple of weeks ago, has already hit the then mentioned target of Rs 1,450. The recent price action suggests that the uptrend would continue and a rally to the next target at Rs 1,850 appears likely.

Investors may buy the stock with a stop-loss at Rs 1,485, for an initial target of Rs 1,850. A breakout past Rs 1,850 would trigger a rally to the next resistance at Rs 1,930.

Century Textiles (Rs.344.40): The short-term outlook for the stock is bullish and the recent price action suggests that a rally to Rs 379 is likely. The completion of the “key reversal day” pattern on Friday along with increased trading volume is a sign that buyers are active.

[caption id=“attachment_464475” align=“alignleft” width=“600”]  The short-term outlook for the stock is bullish and the recent price action suggests that a rally to Rs 379 is likely.[/caption]

Long positions may be considered with a stop-loss at Rs 330, for an initial target of Rs 379. A move past the first target could trigger a rally to the major resistance at Rs 410.

(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.)