India Stock Market – Weekly Review

Correction in Nifty continues; clear picture may emerge next week

In the last week’s review we discussed about “harami” candlestick pattern and it could be a confusing signal unless confirmed by a green candle and positive close above 4530. For this to happen, the index had to gain about 128 points, preferably with a full upward gap or even a partial upward gap. I had also mentioned that it didn’t seem to be a possibility since bulls were losing momentum on Friday.

As expected, confirmation couldn’t be achieved on Monday, as the market lost 62.05 points. However the bulls were seen in action on Tuesday as the market gained 16.85 points. But it formed an “inverted hammer” meaning the index was brought back near its opening price due to sell off at higher levels. On Wednesday the bulls were in perfect control; the Nifty gained 105.75 points. Again, a “three inside up pattern” was formed. The index achieved a high of 4530 on Thursday before collapsing once again by 58.90 points. So 4530 has acted as a strong resistance for the index. On Friday the market was deep in red with the index losing 164 points at one stage. However, the afternoon session saw bulls coming back once again. Nifty had lost 69.85 points today. On weekly basis the index has lost 68.20 points or about 1.55%.

In the daily chart of Nifty, we can see the “Three inside up” pattern (“Harami” followed by a green candle and higher close). Since the bulls failed to cross 4530 and after yet another fall, we have to maintain 4218 as the next support level.

Now that the index has closed below 4363 on Monday/Tuesday as well as today this should act as a minor resistance when Nifty reverses. Let us discuss the Fibonacci retracements as shown below.

It can be seen that 4310 (61.8% retracement level) has not yet been breached on a close basis, though low went below it on a couple of occasions. A close below this level would mean that when index reverses, it may find difficult to break its resistances and the trend may not be strong.

The intraday chart of Nifty for Thursday is been shown below. On Thursday bulls lost control in the afternoon while today they were back in action after 2 pm. Thursday’s quick fall meant that the market had a strong negative opening today. The bulls have managed to break intraday resistance and this could be positive for next week.

Today’s intraday chart is given below:

Intraday charts courtesy: NSE

Forecast for next week:

In all probability the market should recover and reverse in the coming week. We saw a strong lower side volatility and intraday resistance breakout today. At market tops and bottoms, volatility will be very high. So the level of 4310 needs to be watched on a close basis. A close below this will make the index more sluggish during pullback rally. A close above 4530 will mark the return of bulls and the market will be ready for further uptrend.

Advance / Decline Ratio:

Date	Adv.	Dec.	Unch.
06-Aug-07	314	790	24
07-Aug-07	724	369	31
08-Aug-07	841	258	31
09-Aug-07	268	843	24
10-Aug-07	309	799	26

This leads to an overall advance % of 43.46, decline % of 54.13 and unchanged % of 2.41% for the week.

Top Gainers / Losers among Index stocks:

Scrip	% Gain	Scrip	% Loss
HCLTECH	6.82	VSNL	8.57
GLAXO	5.74	HINDALC0	6.98
TCS	4.34	STER	5.86
SUZLON	4.28	ICICIBANK	5.61
BPCL	2.30	GAIL	5.10

Top Gainers / Losers in overall market:

Scrip	% Gain	Scrip	% Loss
ETCNET	92.71	ABGSHIP	17.63
CONSOFINVT	40.03	LOKESHMACH	11.45
ORBITCORP	37.79	IBREALEST	11.11
RUCHIRA	29.92	RENUKA	10.91
JAICORPLTD	27.63	GREAVESCOT	10.37

Please note that only ‘A’ group and ‘B1’ group stocks of Bombay Stock Exchange (BSE) are considered for the above table.

ETC Network is a case of bear trap. Orbit Corporation was The India Street short term pick. From 272.70 on June 29 it has appreciated to 504.30 today (85%). We discussed about Indiabulls Real Estate in “Technical review of select India stocks for medium term” and Shree Renuka Sugars in “How do IPO’s fare in Secondary Market?”.

The India Street analyzed Puravankara Projects Limited IPO. The issue closed on August 8 after the price band was revised to Rs.400/- to Rs.450/- per share. It got oversubscribed by 1.91 times. Qualified Institutional buyers oversubscribed the issue by 2.69 times, high networth individuals by 0.99 times and retail investors by 0.64 times. Omaxe got listed on August 9. It was issued for Rs.310. It opened with a premium of Rs.100 at Rs.410. It reached a high of 448 after listing. However, it couldn’t sustain selling pressure at higher levels and closed today at 345.75.

Our short term pick India Glycols closed at 184.80 on August 8, gaining 12.55% since our analysis on July 18. Long term pick Nagarjuna Fertilizers gained about 13.20% this week. Apart from these there are no other major movers among our short, medium or long term picks.

5 India Stocks You Need to Own in the Short Term

In this article let us review some stocks which are technically bullish for the short term. As I have mentioned in my earlier article these stocks are selected either from A category or B1 category of BSE (Bombay Stock Exchange). This helps in eliminating illiquid stocks, those with listing related issues etc.

Gokaldas Exports Limited:

Technically this stock is looking great for the short term. Yet another incidence of a stock losing more than half its value in this wonderful bull market. It had fallen to a low of 186.65 last month from a high of 407.70 in April 2006. The stock was split into a face value of Rs.5 from Rs.10 during February 2007. The high corresponds to the adjusted value.

Watch the chart below. It is in the third wave and it has broken its short term resistance at 234.

Short term resistance exists for the stock at 280. Medium term resistance is at 332.45. It is a short term trader’s dream stock from a technical point of view.

In weekly charts, it is currently in the first wave. So, after the 5^th wave in daily charts, the stock may either get corrected or consolidate. If the stock is able to move into 3^rd wave in weekly charts, we can view it for a medium term.

Hindustan Construction Company Limited:

In my earlier article we saw about bullish patterns such as double bottom, triple bottom, cup and handle breakout etc. Here is a classical example. This stock, like the previous one, is in third wave, which many people reckon the best to trade. It broke its short term resistance at 110 on 21.06.07. Today it has gained 7.73%. The next resistance is around 127.60 and after that 149 will be the next. Triple bottoms are very highly reliable patterns of bullishness. In 2005, CCL had a similar triple bottom. After breaking its resistance at 213 on 13.06.2005, it went all the way up to close at 529.15 on 13.01.06. This is only an example; there is no guarantee that it will get repeated in this case.

Orbit Corporation Limited:

This is a recently listed stock. If we consider the entire upmove from 110.15 to 264.60 and again a correction to 215.25, a full cycle has been completed in daily charts. The stock has broken its short term resistance. However, today the long upper shadow indicates possible sell off; that can be confirmed by the higher volumes. The stock is currently on first wave. So a decline cannot be ruled out. But it still looks good for the short term.

South Indian Bank Limited:

This has also broken its short term resistance on 20.06.07. A falling window was formed on 02.04.07. Watch the gap between previous day’s low and this day’s high. These gaps, it is often said, are formed only to get closed. After this downward gap formation stock consolidated for a while before breaking out. Once again, the stock has consolidated for about 45 days, eventually before breaking out again. The stock is bullish now in both daily and weekly charts.

Short term targets work out to about 156.

Opto Circuits India Limited:

This stock is bullish in both daily and weekly charts. Watch the huge triangle breakout in daily charts with a triangle height of around 94 rupees. After the breakout the stock went into consolidation. It has once again broken out. Short term target works out to 455. The triangle breakout, again is a very bullish sign.

We will watch out for the stock’s performance.

We shall review the stocks discussed here in our future articles.