Pull-back in progress: Hitendra Vasudeo

Technical Analyst, Hitendra Vasudeo:

Last week, the BSE Sensex opened at 18196.08, attained a low at 18144.22 and moved up to a high of 19058.80 before it finally closed the week at 19016.46 and thereby showed a net rise of 773 points on a week-to-week basis.

The support of 18000 was held and an intra-week rally was seen. Pull-back is being witnessed and the retracement level of the fall from 20203 to 18144 is placed at 19169 and 19411. The lower top is placed at 19754 and the 78.6% retracement level will be at 19754.

The daily chart stochastic has rushed into the overbought zone whereas the RSI is rising and indicates that the rise can move higher towards 19169 and 19411 at least which may extend to 19754.

Overall support for the week will be at 18739-18420-18000. A fall and close below 18000 may resume the downward correction again.

The current rise may be a pull-back to the retracement level before it starts moving down again.

On a further fall and close below 18000, expect the slide towards 16654 at least and may be to 14423 at the outer level. These are 61.8% and 100% projections of the fall from 21108 to 15135 from 20203.

Earlier, we had seen the 78.6% and 88.6% of the fall from 21108 to 15135, which were placed at 19937 and 20510.

The high made was 20203. In January & February 2013, we had indicated about the likely top formation at 20203.

The fall has been good enough and we have to see whether the current pull-back has the power to cross the last peak of 20203. Failure to cross 20203 in days to come may create a lower top to slide down.

On the long-term historical chart, we saw the highest top in 2008 at 21206. Since then, the wild swing down to 7697 and then up to 21108 and the recent swing from 21108 to 15135 to 20203. All these swings are part of the corrective structure since the peak of 21206 made in 2008.

BSE Mid Cap Index

The downtrend may continue with volatility unless 6356 is crossed on a closing basis. The fall in the mid cap stocks appears to have halted and mid caps may participate in the pull-back. Investors need to be careful and must get in and out. Getting stuck is not acceptable.

BSE Small Cap Index

The low of 5460 may be under pressure. A vertical rise and close above 6138 may halt the slide. Expect the lower range to be tested with volatility. The small cap index is almost at the Oct’2008 low range. Bounces may, therefore, occur but how far up it goes is to be seen.

Conclusion

A support attempt may be seen at 18000. The slide will extend below 18000. A pull-back is in progress and how much it spikes is to be seen.

Strategy for the week

Last week, the short position revised stop loss of 18600 was crossed. The stop loss was revised specifically to reduce the risk. A breakout above 18600 from a trading perspective was witnessed and the high of last week was 19058.

A weaker opening and correction to 18739-18420 can be used for buying with a stop loss of 18100. Expect the higher range of 19335-20250 to be tested. If a high is attained first and then the buying range emerges, avoid buying in that case. Sell on a fall below 18100 with the high of the day as stop loss or 19016, whichever is higher.