Nifty, Bank Index may be poised for next uptrend

Special to Firstpost

S&P CNX Nifty (5,697.70): The month-long range-bound trading seems to have been finally resolved during the week gone by. As observed in recent weeks, the immediate target of the Nifty is 6,000 and the price action this week indicates that the journey towards this target is underway. ( See chart )

The short-term bullish view would be invalidated if the Nifty falls below the recent swing low of 5,580. While a breach of this swing low would be a sign of short-term weakness, it would not affect the view of a rally to the 6,000-mark.

A fall below 5,580 would be a pointer that the index is still in a downward corrective phase and the rally to the 6,000-mark and beyond would be delayed. The index has to fall below 5,200 to invalidate the chances of a rally to 6,000.

CNX Bank Index (11,460.45): The price pattern in this index was no different from that of the Nifty. After a brief poke below the lower end of the prior trading range, the index recovered swiftly in the last couple of trading sessions. It remains to be seen if this is just a ploy by “smart-money” to trap the short-sellers.

The technical indicators suggest that the index is poised to resume the next leg of the uptrend. Until the index cracks below 10,970, there would be a strong case of a continuation of the uptrend to the next target at 12,200.

Positional traders may use intermittent price weakness to build long positions in banking stocks. The likes of Oriental Bank of Commerce, Union Bank and Corporation Bank are the top picks from the public sector space. In the private sector universe, HDFC Bank, Axis Bank, ICICI Bank and Kotak Mahindra come across as the preferred choice.

Zee Entertainment (Rs 190.95): After a prolonged period of consolidation, the stock has been in a strong uptrend since 10 May. The recent price action indicates that the stock is headed towards the next target-cum-resistance level of Rs 225.

Any price weakness to the minor support at Rs 182-185 range may be used to buy the stock with a stop-loss at Rs 165, for an initial target of Rs 225. The uptrend would gain momentum beyond Rs 225 and the stock could then rally to the major target at Rs 250.

Hexaware Technologies (Rs 113.20): The stock has been in a major consolidation phase in the past several months. The price action in the past few days indicates that the stock has completed this correction and is in its early stages of the next upward move. ( See chart )

Short-term traders may buy the stock with a stop-loss at Rs 101, for a target of Rs 145. Those willing to play the waiting game may get opportunities to exit at Rs 175.

(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.)