Nifty In A Cool-Off Mode

NSE Nifty:

The NSE Nifty has finally delivered some decisive price action in the form of an upward breakout from its trading range between 5020 on the downside and 5190 on the upside. A sideways move, which lasted for almost 14 trading sessions, was finally followed by an upward thrust. This made the 5400 level look like a realistic target, provided the Nifty sustains above the 5190 level with respect to the closing. Despite a clear move in terms of a directional bias, the Nifty has been rather tardy in its progress. A scrip-specific approach is advocated, as some hesitation in terms of the Nifty remains a distinct reality, which is probably due to a rather strong congestion area between the 5300-5400 levels.

The Mid and Small-Caps have been a revelation of sorts and brilliant movers, completely outperforming the rest of the market. Banks have been right at the forefront and Capital Goods too have done decently well. Consumer Durables have gained ground but have run into a bout of profit taking. The FMCG counters continue to hang on to the higher levels, while Healthcare has posted a fresh all-time high. IT, however, has remained lacklustre. Metals fared slightly better but have begun slipping again, while Realty has begun to make progress.

The Nifty has broken its shackles, so to speak. Despite the near-term cool-off, the bias retains its positive hue, indicating that this is a scrip-specific market in which to go selectively long.

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DLF | CMP - Rs 213.65 | Buy

DLF bottomed out by posting an intra-week low of Rs 124.15 during the week ended 6th February, 2009, and these levels have rarely been seen since. The scrip launched into an intermediate uptrend to peak at an intra-week high of Rs 277.50 during the week ended 17th April, 2009. It couldn’t sustain these levels for long, and declined to post an intra-week low of Rs 220 during the week ended 8th May, 2009. The scrip commenced its uptrend from here, and rallied to peak at an intra-week high of Rs 490.80 during the week ended 23rd October, 2009.

Currently, DLF seems set to stage an up-move after a decent weekly consolidation. With even the daily picture looking better, a further upside from these levels cannot be ruled out.

Trading Pointers:

HDFC peaked at an intra-week high of Rs 543 during the week ended 31st December, 2009, and declined to post an intra-week low of Rs 460 during the week ended 29th January, 2010. The scrip launched into an intermediate uptrend, peaked at an intra-week high of Rs 627.80 during the week ended 16th July, 2010, only to enter a corrective phase, and declined to post an intra-week low of Rs 576 during the week ended 30th July, 2010. It then staged a rally to peak at an intra-week high of Rs 780.05 during the week ended 17th September, 2010, and entered a corrective phase.

Currently, HDFC has reversed direction after receiving significant support from the Rs 640 level. A weekly close above the Rs 690 level could mean the possibility of a further upside from here.

Trading Pointers:

NALCO  | CMP – Rs 61.70 | Buy

NALCO bottomed out by posting an intra-week low of Rs 47.12 during the week ended 20th February, 2009, commenced a short-term uptrend, and rallied to peak at an intra-week high of Rs 99 during the week ended 22nd May, 2009. The scrip entered a corrective phase to actually bottom out by posting an intra-week low of Rs 61.50 during the week ended 17th July, 2009. It then moved sideways before recovering to peak at an intra-week high of Rs 131.48 during the week ended 8th January, 2010, only to decline from here.

Currently, the scrip seems to be on the verge of commencing a higher top, higher bottom formation on the daily charts, indicating the possibility of a further upside from these levels.

Trading Pointers:

Union Bank Of India | CMP - Rs 209.75 | Buy

Union Bank bottomed out by posting an intra-week low of Rs 115.25 during the week ended 13th March, 2009, took support at the Rs 120 (support) level, recovered smartly and peaked by posting an intra-week high of Rs 264.90 during the week ended 24th July, 2009. The stock declined from here, struggled a bit, finally overcame its recently-posted high, and entered a medium-term uptrend. It appreciated to peak at an intra-week high of Rs 426.80 during the week ended 29th October, 2010, and entered a corrective phase.

Currently, Union Bank could be commencing its short-term uptrend. With the oscillators looking positive, a further upside from these levels cannot be ruled out.

Trading Pointers:

Sebi Disclosure: The author is an active market participant and could not only be having positions but could even be having contrary positions in the stocks mentioned above.

* LEGEND:

• EMA - Exponential Moving Average.
• MACD - Moving Average Convergence Divergence
• RMI - Relative Momentum Index
• ROC - Rate of Change
• RSI - Relative Strength Index

*It would be pertinent to note that these are just tools to arrive at a buy or sell decision. There are no absolutes in this sphere, so the best one can do is to minimise losses and let the profits run.

*In the event of a sharp movement materialising in the scrips recommended - both upwards or downwards (the analysis is done on Monday evening based on the week's price movements while market action can only be taken on Thursday) investors would do well to stay away. Despite an active movement in the scrip, if a need arises to trade - investors can use the support/resistance levels as stoploss and/or entry/exit for taking a position in the market.  In spite of the above-mentioned statement, investors are advised to use their own discretion.