Inching up towards new highs

Poor momentum signals

There were very nominal changes to index values in a settlement week where the Nifty swung between a high of 5,294 points and a low of 5,193 before finally settling at 5,282 for a small gain of 0.4 per cent. The Sensex was also up 0.4 per cent at 17,644 points. The Defty gained a more substantial 0.7 per cent due to the rupee strengthening against dollar.

Breadth was fair through the week with advances outnumbering declines. Volumes were on the low side for a settlement week. The BSE 500 was ahead by 0.3 per cent while the Midcaps gained 0.4 per cent and the Junior was up 0.8 per cent. FIIs were net buyers while the domestic institutions continued to be net sellers--- this has been the pattern through the entire March settlement

Outlook: The market is likely to touch a new 52-week high sometime next week, beating the 5,310 mark it registered in early January 2010. But momentum is weak and so are volume indicators. Unless there's a pickup in trading interest, prices beyond the 5,300 mark will not be sustainable. Most likely, prices will remain in the range of 5,200-5,300.

Rationale: The intermediate trend has now been up for around 7 weeks and it could stay up for several more weeks. If the pattern of higher highs is maintained, the 52-week high of 5,310 would be exceeded and that would confirm a strong long-term trend as well.

However, there are signs of weakness in the low volumes and low momentum indicators. Another technical signal of weakness is that the simple 200-Day Moving Average (DMA) is outperforming the exponential 200 DMA. A correction should find support at around 5,200. A possible reversal in the intermediate trend would be signalled by a fall below 5,193, setting up a pattern of lower lows.

Counter-view: Most likely, unless volumes climb, the market is likely to trade in the range of roughly 5,200-5,350 next week and end in the lower half of that zone. One underlying cause for a non-trending market is that the DII-FII attitudes have been consistently opposed. If institutional attitude is aligned, the market will move in the direction of net institutional positions. Until volumes do climb, we won't see a major breakout.

Bulls & Bears: The lack of a strong trend in the overall market has been reflected in sector movements. In many cases, one day of net sector gains has been followed by sell-offs in the next session. Banks were among the best performers last week with the BankNifty bouncing almost 2 per cent.

The IT Index underperformed, with only nominal gains. Smaller IT stocks did better than the larger ones but the rising rupee could put pressure on the whole sector. Pharma stocks registered steady gains with Ranbaxy, Cipla, Dr Reddys, Glenmark Piramal all finding backers.

Energy was in the limelight on Friday as were auto- and auto-ancillary scrips. Both sectors look poised to register potential gains on Monday as well. The trends in metals and real estate appear quite mixed. Engineering and construction also showed signs of selective investment.

MICRO TECHNICALS

BAJAJ AUTO
Current Price: Rs 1,977.9 0 Target Price: Rs 2,050

The stock has just made an upside breakout on expanding volumes. It has the potential to move till around the Rs 2,050 and it should reach Rs 2,020 in the short-term. Keep a stop at Rs 1965 and go long. Be prepared for excessive volatility.

GLENMARK PHARMA
Current Price: Rs 252.60 Target Price: Rs 265

The stock is picking up volumes along with a strong uptrend in price. It has the potential to rise till around Rs 280- Rs 285 but it will run into resistance at around Rs 265 so, that should be the initial target. Keep a stop at Rs 249 and go long. Book 75 per cent profits at Rs 265 and reset the stop to Rs 260.

ONGC
Current Price: Rs 1,079. 90 Target Price: Rs 1,120

The stock has started to move up on some volume expansion. It has the potential to test Rs 1,120 on an intra-day basis and it may move further, till around the Rs 1,140 mark. Keep a stop at Rs 1,065 and go long. Above Rs 1,115, book 50 per cent profit and reset the stop loss to Rs 1,105.

HIND UNILEVER
Current Price: Rs 238.50 Target Price: Rs 250

The stock has just started recovering from a period of sustained selling that pushed prices to a recent low of Rs 218. It has the potential to bounce till the Rs 250 level. Keep a stop at Rs 232 and go long. Book 50 per cent profits above Rs 245 and reset the stop loss to Rs 250.

ICICI BANK
Current Price: Rs 947.50 Target Price: Rs 920

The stock is range-trading through a zone of Rs 915-960 and it's more likely to head down in the next week. Keep a stop at Rs 955 and go short. Increase the position below Rs 940. Start booking profits at around Rs 920. Below Rs 920, consider reversing the position and going long.