Stock rally? Not quite. It's time to book partial profits

Special to Firstpost

S&P CNX Nifty (5,627.20): The rally that commenced on June 24 gathered momentum during the week gone by. While it is also positive to note that the index has closed above the recent high of 5,605, it not time to rejoice as yet.

The crucial downward-sloping trendlinet (displayed in the attached chart) has acted as a strong trend barrier and the index is yet to conquer it. A close above this trendline would indicate that the bearish forces have been overwhelmed.

Until there is a breakout past this trendline, which is also backed by a subsequent bullish momentum, it would be safer to have a neutral-to-bearish stance. Those who already have long positions may consider taking profits, at least partially.

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[caption id=“attachment_35534” align=“alignleft” width=“380” caption=“Given the recent run-up in the price of quite a few stocks, it would not be a bad idea to pull some money out of the market by taking profits. Reuters”]  [/caption]

BSE Sensex (18,762.80): This index too is perched below a crucial trendline that runs through the January 3 high of 20,664.80 and the April 6 high of 19,811.14. Notwithstanding the sharp rally this week, the trend still remains bearish until the index closes above this trendline.

Given the recent run-up in the price of quite a few stocks, it would not be a bad idea to pull some money out of the market by taking profits. Fresh long positions may be considered on weakness.

Ranbaxy Laboratories (Rs 527.10): After a sharp rise from the May 5 low of Rs 443.50, the stock has struggled, in recent weeks, to get past the crucial resistance at Rs 550.

The fall witnessed in the last couple of trading sessions indicates that a short-term downward move is underway. The downtrend would gain momentum on a close below the short-term support at Rs 504 and the stock could then ease to the major support at Rs 482. Short positions may be considered on a rally, with a stop-loss at Rs 557 and target of Rs 504.

Sintex Industries (Rs 179.35): The stock has been in a downtrend since May 31 and has been confined to a downward sloping trend-channel in the past few weeks.

The failure on Friday to get above the upper parallel of this trend channel is a sign of weakness. Short positions may be considered with a stop-loss at Rs 190, for a target of Rs 165.

(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.)