On Friday, the National Stock Exchange revised the price bands (also known as the operating range) for 214 stocks. Out of these, price bands were increased for 209 stocks. For 90 stocks, 10% price band is applicable instead of current 5%; For 10 stocks, 20% price band will come into existence replacing 5%; The remaining 109 stocks’ price band has been increased to 20% from 10%. This means that the liquidity for these stocks will increase. Surely a good news for the market.
Next, the not so good news:
The Nifty has failed to close above 4530, an important resistance level.
In last month’s review, I had mentioned that the index needs to form a higher high and higher low to resume uptrend for achieving the next target of 4935.
| Date | Points Gained | % Gain |
| 03-Sep-07 | 10.75 | 0.24 |
| 04-Sep-07 | 4.50 | 0.10 |
| 05-Sep-07 | -3.40 | -0.08 |
| 06-Sep-07 | 42.75 | 0.96 |
| 07-Sep-07 | -9.10 | -0.20 |
Except on Thursday, the Nifty gained or lost very marginally. The overall gain during the week for Nifty is 45.50 points or 1.02%.
It can be seen from the daily chart that as resistance level is approached, the volatility increases. Once the Nifty went past 4530, a minor sell off occurred on Friday. This has resulted in a long upper shadow. A ‘doji’ was formed on Tuesday, indicating that market is not sure which way to go.
As of now, there are no significant reversal signs in the daily chart. A “bullish engulfing” pattern has been formed on Wednesday and Thursday. This formation, when occurs near support levels at the end of a downtrend is a reversal sign (it of course needs a confirmation on the third day). Whereas, if it is formed on the top of an uptrend, it is referred to as “double lovers’ suicide’ by the Japanese, meaning more people will jump into the rally thinking it would continue further. But profit booking may start, keeping all those who entered the stock (near the top of the trend) at bay.
Forecast for the next week:
Now we have only a clue; there is no confirmation. But on Friday, the long upper shadow indicates some sell off. So, a corrective decline next week cannot be ruled out. In such a case, one has to watch out for 4340 and 4211 which are 38.2% and 61.8% retracements in daily chart. Since Nifty is on first wave, a new support level should occur as trading goes on.
Nifty future traders may enter long positions only after confirmation of the trend reversal. Short sellers on the other hand, may see some profit initially, but in bull markets they are the ones who suffer most.
Nifty continues to be bullish in medium term and long term charts.
Sensex:
In the sensex also, a “bullish engulfing” pattern has been formed on Wednesday and Thursday. A bullish “three inside up” pattern has been formed at the bottom of the downtrend (compare this with the bullish “three outside up” pattern in Nifty). The sensex too, is poised to witness a correction. The support levels for the sensex are 14979 and 14521.
The weekly charts of Nifty and Sensex are given below. Note the formation of candlestick patterns in both the charts.
In case of Sensex, a bullish “Homing Pigeon” pattern formation occurred while the Nifty encountered a bullish “Three inside up” formation. It is quite possible to analyze both indices simultaneously, but for the sake of simplicity it is good enough to analyze one.
The India Street selected some stocks as short term picks. The following table shows their status.
| Scrip | Close 29-Aug | Highest Close | % Gain |
| BOMDYEING | 542.45 | 611.10 | 12.66 |
| GTLINFRA | 34.30 | 36.85 | 7.43 |
| KOTAKBANK | 699.35 | 732.50 | 4.74 |
| SCI | 178.85 | 202.00 | 12.94 |
| SUNILHITEC | 204.70 | 250.75 | 22.50 |
Our medium term pick XL Telecom Limited closed at 180.65 (on June 29 its close price was 134.25) gaining 34.6% in just over two months time.
Advance / Decline Ratio:
| Date | Adv. | Dec. | Unch. |
| 03-Sep-07 | 849 | 276 | 25 |
| 04-Sep-07 | 699 | 422 | 30 |
| 05-Sep-07 | 557 | 572 | 21 |
| 06-Sep-07 | 712 | 405 | 31 |
| 07-Sep-07 | 502 | 636 | 15 |
Top Gainers / Losers among Index stocks:
| Scrip | % Gain | Scrip | % Loss |
| REL | 9.11 | BHARTIARTL | 3.61 |
| SUNPHARMA | 8.76 | GLAXO | 3.01 |
| CIPLA | 8.34 | BPCL | 2.20 |
| GRASIM | 7.87 | ZEEL | 1.18 |
| HDFC | 7.56 | ONGC | 1.03 |
Top Gainers / Losers in overall market:
| Scrip | % Gain | Scrip | % Loss |
| AMBICAAGAR | 46.64 | PATNI | 12.01 |
| DECOLIGHT | 45.19 | JAYAGROGN | 10.63 |
| AKSHOPTFBR | 39.78 | USHAMART | 7.09 |
| SAREGAMA | 34.70 | TELEDATAIN | 7.02 |
| SAMTEL | 34.63 | WELGUJ | 6.93 |