Let Nifty prove itself, but it's time to punt on cement stocks

Special to Firstpost

S&P CNX Nifty (5,342.10): The Nifty moved in line with expectations. As observed in the week before, the index staged a recovery and has almost hit the target-cum-resistance zone of 5,350-5,380. It is now at a crucial resistance zone and a breakout past 5,450 would be a sign that the next move to 5,700 is underway.

On the contrary, a failure at around the 5,380-level would be a sign of weakness and the index could then slide to the major support at 5,150. Given that the index is now at a crucial juncture, it would make sense to wait for the price action to give a clue about where it is headed.

While traders may have to wait for further action to initiate a trade in the Nifty, there are lots of stocks that offer compelling trading opportunities. It is advisable to concentrate on such stocks rather than the Nifty.

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[caption id=“attachment_448638” align=“alignleft” width=“380”]  While traders may have to wait for further action to initiate a trade in the Nifty, there are lots of stocks that offer compelling trading opportunities. Reuters[/caption]

The stocks from the cement sector come across as tradable candidates. Grasim Industries, ACC and Ambuja Cements are the top candidates from the cement space. From the relatively illiquid stocks, long positions may be considered in TTK Prestige and VST Industries.

CNX Bank Index (10,122): Similar to the Nifty, this index too moved in sync with expectations. After the anticipated fall to 9,850, the uptrend resumed and the index is now on course to hit the target of 10,350 mentioned last week.

As highlighted last week, the index has to move past the key resistance at 10,950 to indicate a reversal of the recent downtrend. Until this resistance is taken out, there would be a possibility that the recovery witnessed on Friday is just a counter-trend bounce within a medium-term downtrend. The downtrend is likely to resume on the completion of the short-term pull-back rally.

Ambuja Cements (Rs 189.50): The stock has been one of the best performers this year. After a sharp rally, the stock has been in a downward correction in recent weeks. The spike on Thursday is a sign that the downward correction is complete and the next leg of the uptrend is underway.

Investors may buy the stock with a stop-loss at Rs 173, for a target of Rs 215. The uptrend would gain momentum on a breakout past the initial target at Rs 215 and the stock could then test the next resistance of Rs 222.

Power Finance Corporation (Rs 160.35): A look at the daily chart of the stock indicates that the sharp crack in price was arrested right at the crucial support level. This is a sign of strength and suggests that buyers are active at the Rs 150-154 range. Given this backdrop, a rally to the immediate resistance at Rs 176 appears likely.

[caption id=“attachment_448637” align=“alignleft” width=“620”]  A look at the daily chart of the stock indicates that the sharp crack in price was arrested right at the crucial support level.[/caption]

Price weakness may be used to buy the stock with a stop-loss at Rs 148, for a target of Rs 176. A move past Rs 176 could trigger a rally to the next hurdle at Rs 182.

(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.)