Weekly review of Indian stock market - June 8, 2007

Important Disclosure

The views expressed below are the opinions of the author based on the principles of technical analysis, a science that has been tested and proven for more than hundred years. The views are unbiased and informative in nature. These do not constitute an offer to buy or sell stocks. Every effort has been made by the author to ensure correctness of the information presented. The author cannot be held responsible for omissions, mistakes etc.

Investing or trading in stock markets is a high risk activity. Those who cannot afford to risk their money should refrain from dealing in stocks.

The author has no vested interest in any of the stocks mentioned. He and/or his close associates may or may not be having positions at the time of writing this article.

It is to be understood clearly that this article has been written purely for informative purposes only and the author cannot take any responsbility whatsoever for transactions, if any, entered into by the reader. The author does not guarantee that the projected targets will be achieved within the stipulated time frame.

Source for the price data displayed in graphics and tables:

National Stock Exchange of India Limited, Mumbai, India

http://www.nseindia.com/

Charts have been created with FCharts Pro, © Spacejock Software, Australia

http://www.spacejock.com/

Index this week:

In the last week’s review, I had mentioned:

“The engulfing pattern seen at the top of the trend on 31.05.07 is not a healthy sign. It was further confirmed by the sell off next day, with a very long upper shadow. We can anticipate a correction now upto 4039 or 3902.”

The nifty closed at 4145, losing 152.05 points on weekly basis or about 3.54%.

As such, there were no reversal signs last week but we got a confirmation of the short term trend reversal now. The nifty is bearish now and we can expect the nifty to hit its support at 3902.

Watch the bearish engulfing pattern followed by a red candle and lower close (also known as three outside down pattern), a highly reliable 3 candlestick pattern in the daily chart of nifty shown below.

The nifty has already broken and closed below its first support at 4218. The upward movment from 3617 to 4218 had very minor corrective declines; if we consider the next high it would be 4039. After that it is 3902. These two levels should act as supports.

Going by the theory of “an ideal bull market” usually 50% retracement should be a good support. This level is 3990. So, anywhere between 3990 and 4039 nifty may be able to bounce back.

Remember that these levels are only indicative and actual levels may significantly vary from the numbers given above.

In the weekly chart also, one may find the “bearish engulfing pattern” formation as shown below. However we need a confirmation on a weekly closing basis to decide on the medium term trend reversal.

Status of index stocks in daily/weekly charts:

The following table illustrates the movement of index stocks in daily and weekly charts (bullish/bearish/sideways)

Scrip	Status (Daily)	Status (Weekly)	Weekly Gain %	Remarks
ABB	Bearish	Bullish	(3.57)	"Dark cloud cover pattern" in weekly chart needs confirmation next week
ACC	Bearish	Bearish	(10.00)
BAJAJAUTO	Bearish	Bearish	(5.59)
BHARTIARTL	Bearish	Bullish	(3.07)
BHEL	Sideways	Bullish	(7.60)	"Bearish engulfing pattern" in weekly chart needs confirmation next week
BPCL	Bearish	Bearish	(8.23)
CIPLA	Sideways	Bearish	(5.74)
DABUR	Sideways	Sideways	0.82
DRREDDY	Bearish	Bearish	(2.71)
GAIL	Sideways	Bullish	(7.32)	"Bearish engulfing pattern" in weekly chart needs confirmation next week
GLAXO	Bullish	Bullish	(1.18)
Scrip	Status (Daily)	Status (Weekly)	Weekly Gain %	Remarks
GRASIM	Bearish	Bearish	(5.14)
GUJAMBCEM	Bearish	Bearish	(4.75)
HCLTECH	Sideways	Bullish	1.19
HDFC	Sideways	Bullish	(6.11)	"Bearish engulfing pattern" in weekly chart needs confirmation next week
HDFCBANK	Sideways	Bullish	(5.42)	"Bearish engulfing pattern" in weekly chart needs confirmation next week
HEROHONDA	Sideways	Bearish	(4.47)	"Bearish harami pattern" in weekly chart needs confirmation next week
HINDALC0	Bullish	Sideways	11.95
HINDLEVER	Bearish	Bearish	(6.25)
HINDPETRO	Bearish	Bearish	(11.73)
ICICIBANK	Sideways	Sideways	(2.90)
INFOSYSTCH	Bearish	Bearish	0.63
IPCL	Sideways	Bullish	(4.16)	"Bearish engulfing pattern" in weekly chart needs confirmation next week
ITC	Bearish	Bearish	(6.49)
LT	Sideways	Bullish	(5.77)
M&M	Sideways	Bearish	(5.82)
MARUTI	Bearish	Bearish	(9.08)
MTNL	Sideways	Sideways	(4.71)	"Dark cloud cover pattern" in weekly chart needs confirmation next week
NATIONALUM	Sideways	Bullish	2.40
ONGC	Bearish	Sideways	(5.11)
PNB	Bearish	Sideways	(6.92)	"Bearish engulfing pattern" in weekly chart needs confirmation next week
RANBAXY	Bearish	Sideways	(5.62)	"Bearish engulfing pattern" in weekly chart needs confirmation next week
RCOM	Bullish	Bullish	1.61
REL	Sideways	Sideways	(3.93)
RELIANCE	Sideways	Bullish	(5.38)	"Bearish engulfing pattern" in weekly chart needs confirmation next week
RPL	Sideways	Bullish	(1.46)	Near resistance zone
SAIL	Bearish	Sideways	(10.06)
SATYAMCOMP	Bullish	Bullish	3.16
SBIN	Bearish	Bullish	(1.62)	"Bearish three outside down" pattern in daily chart
SIEMENS	Sideways	Bullish	(1.59)	"Dark cloud cover pattern" in weekly chart needs confirmation next week
STER	Sideways	Sideways	(2.59)
SUNPHARMA	Sideways	Bullish	(3.33)	"Bearish engulfing pattern" in weekly chart needs confirmation next week
SUZLON	Bullish	Bullish	4.14
TATAMOTORS	Bearish	Bearish	(12.80)
TATAPOWER	Sideways	Bearish	(1.97)	"Dark cloud cover pattern" in weekly chart confirmed this week
TATASTEEL	Sideways	Bullish	(7.79)
TCS	Sideways	Sideways	0.11
VSNL	Sideways	Bearish	(0.86)	"Dark cloud cover pattern" in weekly chart confirmed this week
WIPRO	Sideways	Bearish	0.62
ZEEL	Bearish	Sideways	(7.06)

From the above table, we can see clear trend in both daily and weekly charts in few stocks whereas in others some indecision exists. Dabur, HCL Tech, Hindalco, Infosys, Nationalum, RCOM, Satyamcomp, Suzlon, TCS and Wipro have gained this week where as the rest are losers. Glaxo, RCOM, Satyamcomp and Sulzon are bullish and ACC, BAJAJAUTO, BPCL, DRREDDY, GRASIM, GUJAMBCEM, HINDLEVER, HINDPETRO, INFOSYSTCH, ITC, MARUTI and TATAMOTORS are bearish. Interesting to note the bearish candlestick pattern formations in the weekly chart – many need confirmation next week! This makes an interesting week ahead.

Advance Decline Ratio:

Date	Traded	Advanced	% Adv	Declined	% Dec	Unchanged	% Unch
04/06/07	1101	404	36.69	665	60.4	32	2.91
05/06/07	1103	534	48.41	527	47.78	42	3.81
06/06/07	1105	228	20.63	852	77.1	25	2.26
07/06/07	1103	388	35.18	672	60.92	43	3.9
08/06/07	1101	350	31.79	723	65.67	28	2.54
Totals	5513	1904	34.54	3439	62.38	170	3.08

This means that the bears have dominated during the week.

Following table gives the list of top 5 gainers and losers among cash stocks:

Scrip	% Gain	Scrip	% Loss
BLBLIMITED	41.31	VAIBHAVGEM	16.60
PARAL	32.84	TVSELECT	15.94
KERNEX	29.94	SGL	16.38
TIMESGTY	28.22	IILTD	15.67
RUBYMILLS	27.64	HILTON	16.17

Conclusion:

As anticipated last week, a corrective decline happened in the market. We need to wait for further confirmation this week. Let us expect that the index and stocks bounce back this week!!

SUNDARAMURTHY VADIVELU

The India Street