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Data Jun 8, 2013

Southward Ho? Nifty, SBI and Titan in bear territory

Special to Firstpost

CNX Nifty (5,881): The Nifty moved in line with expectations and the bearish undertone pushed the index below the prior swing low of 5,930. This has resulted in a bearish sequence of lower highs and lower lows, which strengthens the case for a slide to 5,650-5,700 mentioned last week.

The recent swing high of 6,134 would now act as the reference point for the bearish camp. The index has to move past this swing high to indicate a reversal of the short-term downtrend.

Reuters

Reuters

The slide in the value of the rupee in relation to the US dollar is another cause of concern from a stock market perspective. Investors may, therefore, avoid long positions in the Nifty as well as individual stocks. Any rally may be used to pare exposures in frontline stocks, with a view to re-enter at lower levels.

Bank Index (12,231.50): The fortunes of the Nifty are closely linked to the performance of the Bank Index. Courtesy the huge weightage of banking and financial sector in the Nifty, the Bank Index is an actively tracked and traded index.

The short-term outlook for the Bank Index remains bearish and a test of the immediate support at 11,500-11,600 appears likely. As long as the index trades below 13,450, there would be a strong case for a slide to the support at 11,500-11,600 range.

Nifty chart

Nifty, daily chart.

Active traders may consider short positions on any recovery, with a stop-loss at 13,000 and target of 11,600. A fall below 11,400 would be a major sign of weakness and could open up downside extending up to 10,750.

State Bank of India (Rs 2,018.60): After posting a high of Rs 2,662 in January, the stock has been in a downtrend and appears headed to the support at Rs 1,800. The stock faltered last month right at the key resistance of Rs 2,450 and the subsequent selloff is a sign that the short-term trend is bearish.

Shareholders in State Bank may reduce their holdings. Traders may go short at higher levels, with a stop-loss at Rs 2,150 and a target of Rs 1,800. If the stock falls below the initial support at Rs 1,800, it would be a major sign of weakness and could lead to a slide to Rs 1,600.

Titan Industries (Rs 272): The rally off the 14 March low of Rs 225 was arrested right at the key resistance of Rs 300. The subsequent selloff in the past few trading sessions is a sign that the short-term trend is bearish. The stock appears vulnerable to a slide to Rs 248.

Titan chart

Titan Industries, daily chart

Those holding shares in Titan may reduce their holdings. Short positions may also be considered by traders with a stop-loss at Rs 303 and an initial target of Rs 248. A fall below Rs 248 would not only lend momentum to the downtrend but would also push the stock down to the major support at Rs 225.

(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 trading interest in the instruments featured in the column.)

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