Indices appear bullish

TRADING DESK/ MACRO TECHNICALS

The market continued to inch up last week in what seemed to be a healthy consolidation. The Sensex closed the week up by 1.91 per cent at 5170.32 points. The Nifty was up 1.92 per cent, closing at 1632.3 points.

The Defty was up 3.71 per cent as the rupee strengthened strongly. Breadth signals were quite good. Volumes were steady. Advances outnumbered declines while the Nifty put-call ratio declined slightly but stayed in neutral territory. The broad BSE 500 was up 1.56 per cent.

Outlook: The major indices appear bullish; they are testing critical resistances at current levels. The Sensex and the Nifty seem very close to completing bullish formations.

If the market closes above Sensex 5200/Nifty 1650, there would be short-term targets in the range of 5350/1700. Long-term targets would be in the range of 5600/1800. While the short-term trend remains positive, the momentum is not very strong.

Rationale: Trend-following indicators like MACD are clearly positive, but oscillators like RSI/ROC are losing strength and moving closer to overbought levels.

This means the upmove is possibly running out of steam. However, we don't see a major downside for the moment and the market is likely to consolidate above 5075/1600 even if there's a short-term reversal.

Counter-view: The earnings season is over with most Q1 results out. Macro-economic drivers aren't in great shape with a weak monsoon and rising crude prices and a potential banking crisis.

If things get worse on the crude front or the RBI fails to maintain confidence with respect to its handling of the GTB-OBC situation, the market could tank. However, there seem no specific technical indicators that suggest a severe drop.

Bulls and bears: Bullishness affected most IT shares and metals also continued to do well. CMC, Infosys, Mastek and Satyam looked good. Hindustan Zinc, Sesa Goa and Sail saw rising prices. Sterlite Opticals and VSNL also saw rising prices.

Other pivotals that looked interesting from the bull's viewpoint included Reliance, Shipping Corp and Tata Tea. IDBI and IDBI Bank get a special look because of the merger news.

MICRO TECHNICALS

CMC
Current price: 592
Target price: 680 The stock has completed a bullish saucer formation and consolidated above the 'lip' of the saucer. It should have a short-medium target of around 680. Volumes have expanded since the saucer was completed around 560 levels.

Go long and keep a stop around that 560 level if you can play for the medium-term. Else keep a tighter stop at 575, where there is also fair support.

IDBI AND IDBI BANK
Current price: 67, 53
Target price: NA

IDBI Bank closed between 52 and 53 while IDBI closed at around 67. Both stocks saw sharply increased volumes over the last two sessions. IDBI Bank looked more interesting for the short-term trader; it closed at around 52.6 after seeing a jump to the 58 level.

It would have a short-term target of around 68. The DFI has much more in the way of upside resistance; the price could settle close to current levels.

However, if IDBI closes above 76, the stock would get a clear run until the 115-levels. These are strictly technical predictions - further news and concrete swap ratios will obviously be critical.

SATYAM
Current price: 339
Target price: NA

The stock has just completed a shallow saucer formation with a moderate increase in volumes in the past week. This is bullish, but not hugely so, at first glance. The short-term target should be in the range of 365-370.

However, the long-term trend seems very solid and the stock could test its January 2004 highs of around 425 in the next 12 weeks. There's good support between 325 and 330 "� keep a stop around those levels if you go long.

SESA GOA
Current price: 538
Target price: 580

The stock has moved up from 350 levels, to its current levels on a trendline at about 45 degrees. At 465 levels, it completed a saucer formation, which started forming in April.

Over the three months, the stock could move until a target of 580. In practice, it is likely to hit those levels a great deal sooner. But it will hit massive resistance around the 580 mark. On the downside, the first major support is available around 515.

VSNL
Current price: 181
Target price: NA The stock saw a massive jump in volumes on Friday, even as it rose from 172. It has strong resistance immediately above Friday's closing prices. It's possible that the stock will now start to consolidate in a narrow range between 180-195.

If it climbs above 195, the stock would have a clear run until 205 and if it closes above 205, it could have a long-term target of around 285. It may be worth an investment at current levels, with a stop around 177.

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