<b>Week Ahead:</b> Markets to remain range-bound

MACRO TECHNICALS

This week is likely to see 150-200 point daily swings between 4000-4200 Nifty levels.

Pivotals made a partial recovery this week after several volatile sessions of alternating trends. The Nifty ended up 1.99 per cent at a closing value of 4190.15 points. The Sensex gained 2 per cent and closed at 14,424 points.

The Defty gained 2.52 per cent as the rupee strengthened again. The FIIs remained net negative despite buying in the latter half of the week, while domestic funds were selectively net buyers.

Breadth was less positive. Though the BSE 500 registered a 0.9 per cent gain, the Nifty Junior was down 0.5 per cent and smaller stocks did worse. Volumes were low in general and especially so in sessions when prices gained.

Key sector indices such as the Bank Nifty and the CNX IT both delivered negative returns.

Outlook: Expect continuing volatility and probable range-trading patterns until the end of settlement. The support between Nifty 4000-4050 has held but the Nifty has also been unable to sustain 4200-plus price levels.

This week is likely to see 150-200 point daily swings between those support-resistance levels. Net losses seem a little more likely.

Rationale: The nearing settlement will add to already-high volatility. The lack of volume on up sessions suggests that there is little real demand. We are into week five of an intermediate downtrend. It could last several more weeks and that would, by definition, mean net losses from here. Bearishness could increase due to political uncertainty.

Counter-view: Until the settlement, there will be both carryover and short-covering. The short-covering could force prices up and, if that lends bullish momentum, it may be enough to bring long players back into action. Support has held along the 200 day moving average, which has been tested three times. This implies the long-term bull market is not dead, merely correcting.

Bulls & Bears: As mentioned above, IT and bank shares got hit hard but bank shares had a mild recovery on Friday. Those sectors apart, it was difficult to find a trend that lasted over a single session.

ACC, Bhel, M&M, L&T, Satyam, Tata Motors and Sterlite were among the few stocks that saw investment buying. Most scrips appear to be stuck inside trading ranges just like the major indices.

MICRO TECHNICALS

Bhel
Current Price: 1753
Target Price: 1785

Bhel has made a technical recovery, closing above an important resistance at 1740 without generating extra volumes on the apparent breakout. It has a target of 1880 but this is unlikely to be hit due to the lack of volume expansion.

There is a resistance at 1785, which will probably halt the upmove. Keep a stop at 1740 and go long. Book profits above 1785.

M&M
Current Price: 640
Target Price: 665

Mahindra has performed an engulfing move with Friday's trading showing a wider high-low range than Thursday. Engulfing sessions generally establish a short-term trend in the direction of movement on that day.

Since M&M gained Rs 50 from low to close, the next few sessions could see further gains. One danger is the lack of volumes. Keep a stop at 630 and go long.

Omaxe
Current Price: 322.25
Target Price: 345, 380 (long-term)

Omaxe is consolidating after coming off Wednes-day's low of 263. It has a possible target of 380 and the volume expansion makes it likely that this target could be achieved. There will be resistance in the 340-345 zone. Keep a stop at 315 and go long. Book partial profits above 340.

Satyam
Current Price: 436.55
Target Price: 465

The stock seems to have bottomed after a fall from a high of 523 a month ago. It moved up from an intra-day low of 410 on Friday. There is a chance of a quick recovery to the 465 levels. Keep a stop at 415 and go long.

Suzlon Energy
Current Price: 1229.75
Target Price: 1300

The stock has been bearish for over a month. But it is consolidating at current levels. There was a big volume expansion on Friday although the price barely changed.

Suzlon could move till the 1300-1310 level while encountering little resistance. If it closes above 1310, a target of 1400 is likely. Keep a stop at 1205 and go long.

(The target price and projected movements given above are in terms of the next five trading sessions unless otherwise stated.)