Nifty still in sight of short-term rally; Opto, CIL in uptrend

Special to Firstpost

S&P CNX Nifty (5,048.60): The bullish trend witnessed in the past couple of weeks spilled over to the week gone by ( See chart ). This has pushed the Nifty within striking distance of the 7 December swing high of 5,100. A breakout past this high would be an early sign of reversal of the medium-term bearish trend.

A look at banking stocks, which have a significant weightage in the index, indicate that the bullish trigger level of 5,100 may be taken out and a rally may extend to 5,175. Apart from the banking sector, the bullish chart pattern in stocks such as Sterlite Industries, Hindalco Industries, Tata Steel and Tata Motors strengthens the case for a rally to 5,175.

[caption id=“attachment_189473” align=“alignleft” width=“380” caption=“A look at banking stocks, which have a significant weightage in the index, indicate that the bullish trigger level of 5,100 may be taken out and a rally may extend to 5,175. Arko Datta/Reuters”] [/caption]

As long as the index trades above the bearish trigger level of 4,800, there would be a strong possibility of a rally to the target of 5,175.

CNX Bank Index (9,516.85): While the Nifty is positioned just short of its bullish trigger level, the Bank index has made a decisive move above the bullish trigger level of 9,300. The short-term outlook is bullish and the chart patterns in banking heavyweights such as Axis Bank, State Bank of India and ICICI Bank confirm the positive view.

The index could now target the next resistance at 9,950. The short-term outlook would be bullish as long as the index trades above the support level at 8,500.

Opto Circuits (India) Ltd (Rs 234.90): After a significant downward correction from the 17 September 2010 high of Rs 327.90, the price pattern in the past few weeks indicates the resumption of the long-term uptrend. The stock could test the short-term resistance at Rs 256.

A breakout past Rs 256 could trigger a rally to the major resistance at Rs 310. Long positions may be considered on weakness with a stop-loss at Rs 210, for an initial target of Rs 256.

Coal India (Rs 343.80): After a nice consolidation, the stock appears to have resumed its uptrend. The stock could rally to the next hurdle at Rs 370. Investors may buy the stock with a stop loss at Rs 310, for a target of Rs 380. ( See chart )

The stock may test the major resistance at Rs 410, once it negotiates past the short-term resistance at Rs 370. As long as the support at Rs 310 is not breached, it would be reasonable to expect a rally to 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.)