Consolidation likely at higher levels

MACRO TECHNICALS

The short term trend is negative and the market is likely to trade between 5,950-6,250 next week with slightly lower volumes

It was a week that saw everything. It started with a small correction, followed up with two massively bullish sessions, followed by another correction. The market hit new highs on Wednesday and consolidated at higher levels in a clear indication that the major trend continues up.

The BSE Sensex closed at 20,030 points for a week-on-week gain of just 0.32 per cent but the S&P CNX Nifty was up 1.23 per cent at 6,047.70 points and the S&P CNX Defty up 1.69 per cent at 5,340.30.

Breadth was reasonable and volumes were fair. FIIs were net buyers except on Wednesday while mutual funds were net sellers. The BSE 500 was up 2.08 per cent and Nifty Junior also outperformed with 2.88 per cent gains. The CNX Midcap was up 5.5 per cent "� obviously much of the action centred on these stocks.

Outlook: The market is likely to range trade between 5,950-6,250 in the next week with slightly lower volumes. This would be a normal consolidation after a breakout. In the intermediate to long-term of 6 weeks plus, there is a target of 6,350 for the Nifty. The short-term trend is negative, the intermediate and long-term trends are positive.

Rationale: An important resistance was broken when the Nifty closed above 6,000 for four sessions in succession. However, the breakout did not come accompanied by the ideal signal of strong volume expansion.

Chart patterns suggest that the 6,350 target will be reached, but, the past two sessions also suggest that it will take several sessions to absorb selling pressure between 6,050-6,250. On the downside, 5,950 will provide strong support.

Counter-view: Institutions have been lukewarm buyers in the past week with much of the impetus being provided by operators. If institutional attitude hardens and concurs in direction, the market will follow.

However, a new intermediate uptrend has clearly been established and this is likely to remain in force for anywhere between 8-12 weeks "� maybe even until the Budget.

Bulls & Bears: Gains were scattered across industries rather than concentrated in certain segments. There appears to be a positive re-rating of cement and pharma stocks with ACC, Ultratech, Aurobindo Pharma, Cipla and Dr Reddy's all moving.

The sugar industry also remains in favour with Bajaj Hindusthan and Triveni Engineering continuing to register gains. Apart from these, assorted stocks such as Aditya Birla Nuvo, Arvind Mills, Axis Bank, Cairn India, HDFC, Indian Hotels, JP Hydro, Lanco Infratech, Praj Industries, and TVS Motor saw major gains.

MICRO TECHNICALS

CIPLA
Current price: Rs 209
Target price: Rs 220

The stock has made a breakout with a fair amount of volume on Friday. It has a short-term target of Rs 220 and a long-term target of Rs 235, which could be achieved in about 4 weeks. Keep a stop at Rs 202 and go long. Book partial profits above Rs 220.

HDIL
Current price: Rs 1,014.55
Target price: NA

The stock has urged from Rs 825 level within the past four sessions. It has seen an excellent volume expansion during that period. It's impossible to set a target with this pattern, but, the stock could run up further. Set a trailing stop at Rs 995 and move the stop loss up 20 units for every 20 unit rise in price.

JP HYDRO
Current price: Rs 131.25
Target price: Rs 145

The stock accomplished a breakout on Friday moving above the resistance at Rs 125 along with a sharp volume expansion. It has a target of Rs 145. Keep a stop at Rs 126 and go long. Book partial profits above Rs 140.

PRAJ INDUSTRIES
Current price: Rs 269.80
Target price: Rs 285, Rs 320 (long-term)

The stock made a big breakout on a strong volume expansion. The key resistance level on daily charts was Rs 250, and there is a slight over-extension in that sense. However, on weekly charts, the key resistance was at Rs 265. The long-term target would be Rs 320, while it could go till Rs 285 in the short term. Keep a stop at Rs 265 and go long. Book partial profits above Rs 285.

TVS MOTOR
Current price: Rs 77.60
Target price: Rs 90

The stock has made an important move on volume expansion. It has a potential target of Rs 90 in the short to intermediate term and it could go further. Keep a stop at Rs 75 and go long. Book partial profits at Rs 85.

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