Stock indices in no man's land - and bears haven't shut shop

Special to Firstpost

S&P CNX Nifty (5,660.65): The Nifty index did a whole lot of nothing during the week gone by. The price movements last week did not provide any meaningful clues about the index’s next major move.

A fall below the 12 July low of 5,496.95 would result in a bearish sequence of lower highs and lower lows. This could make the index susceptible to a slide to the major support of 5,390.

Until the index moves above the down-sloping trendline running through the 6 April high of 5,944.45 and the 8 July high of 5,740.40, it would be safe to work on the premise that the downtrend is still in force.

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More importantly, long positions may be avoided till such time as the index moves above this trendline.

[caption id=“attachment_42540” align=“alignleft” width=“380” caption=“It would be a better ploy to hunt for buying opportunities in small and mid-cap stocks. Punit Paranjpe/Reuters”]  [/caption]

BSE Sensex (18,561.92): The price pattern during the just concluded week does not negate the negative outlook. As observed in earlier weeks, the index has to move above 19,200 to indicate reversal of the bearish trend.

While select stocks from the banking sector such as Axis Bank, ICICI Bank and HDFC Bank may offer short-term trading opportunities, it would be a better ploy to hunt for buying opportunities in small and mid-cap stocks.

Eros International Media (Rs 196.65): The stock has been in a steady uptrend in recent weeks. The technical indicators suggest that the uptrend is likely to continue and the stock could rally to the short-term resistance of Rs 215.

From the attached daily chart, it is apparent that the stock is trading within the up-sloping red trend channel. The stock is likely to test the upper parallel of this channel, at Rs 215.

A fall to the centre-line of this channel in the Rs 185-190 range would be a buying opportunity, with a stop-loss at Rs 177.

Bharat Forge (Rs 335.65): Thursday’s close above the down-sloping trendline connecting the 2 December high of Rs 412.90 and 6 April high of Rs 370.50 is a sign of strength. The recent price action indicates that the major downtrend from the 2 December high was completed at the 24 June low of Rs 284.10.

Long positions may be considered with a stop-loss at Rs 319, for a target of Rs 353. A breakout past Rs 353 could trigger a rally to the major resistance at Rs 366.

(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 interest in the instruments featured in the column.)