Nifty, Bank Index will continue to be bearish for now

Special to Firstpost

S&P CNX Nifty (5,290.85): The index did a whole lot of nothing during the week gone by. This price action does not invalidate the bearish view featured in recent weeks.

As highlighted in the past several weeks, the Nifty has to move past the critical resistance at 5,500 to indicate a resumption of the uptrend that commenced at the 20 December low of 4,531. Until this level is taken out, it would be advisable to avoid fresh equity exposures and use interim price rallies to take profits on long positions.

[caption id=“attachment_283796” align=“alignleft” width=“380” caption=“The Nifty has to move past the critical resistance at 5,500 to indicate a resumption of the uptrend. Flickr”]  [/caption]

A fall below 5,135 would lend momentum to the downtrend and strengthen the case for a fall to the major support at 4,950. Those eager to take equity exposures may wait for at least a breakout past the minor resistance at 5,400 before committing fresh funds.

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CNX Bank Index (10,456.50): The Reserve Bank of India’s much-awaited policy meet is done and dusted but the more-than-anticipated rate cut failed to prop market sentiment. The short-term outlook for the index remains bearish and a move past 10,950 is required to invalidate the negative outlook.

Unless the index moves above 10,950, there would be a strong case for a test of the short-term support at 9,800. Given the uncertainty prevailing across the globe, it would make sense to stay light and avoid big-ticket exposures until a clear trend emerges.

Dabur India (Rs 112.35): The downtrend correction off the 17 June high of Rs 122 was completed at the 30 January 2012 low of Rs .92.30. The subsequent price action indicates that a short-term uptrend is underway.

The stock could rally to the short-term resistance at Rs 125. Long position may be considered on weakness with a stop-loss at Rs 103, for a target of Rs 125.

The uptrend would gain momentum on a breakout past Rs 125 and the stock could then target the major resistance at Rs 134.

Hindustan Petroleum (Rs 304.85): The stock has been consolidating in a narrow trading range in recent weeks. The price action on Friday indicates that the stock could seek higher levels. A breakout past the immediate resistance at Rs 316 would be a sign of strength and indicate that the stock could rally to the major resistance at Rs 345.

Long positions may be considered with a stop-loss at Rs 274, for a target of Rs 345.

(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.)