Market could range between 4050-4200

MACRO TECHNICALS

Though the market is likely to be range-bound, one key signal suggests that the it is more likely to move up rather than down.

The range trading continued through a week when very little of note happened. The Nifty closed at 4076.55 points, down by 0.99 per cent. The Sensex was also down 0.99 per cent, closing at 13796.

The rupee eased slightly after a strong bull run, causing the Defty to lose a disproportionate 1.81 per cent. Volumes were average and advances were outnumbered by declines. The BSE 500 was off by 0.71 per cent. The Bank Nifty gained 0.45 per cent while the CNXIT lost a disproportionate 2.78 per cent.

Outlook: Until there is a clear breakout from the current trading range, there will be little to report. The Nifty could continue to range between 4050-4200 indefinitely. A close outside this range would lead to a new trend. One key signal suggests that the market is more likely to move up rather than down.

Rationale: Once a range-trading pattern is clearly established with support-resistance levels, it will continue until a trigger of some description causes a breakout. Until such a breakout, direction is tough to predict.

Once the breakout occurs, it will be relatively easy to project targets "� the Nifty s likely to move at least 150 points in the direction of the breakout. At this specific moment one key factor could be that both FIIs and mutual funds are net buyers. A coincidence of institutional attitudes usually leads to a bull run.

Counter-view: For the past three weeks the market has been range trading. Prior to that, it was in an intermediate uptrend from late March. In terms of timing, the odds are more in favour of a drop rather than a rise. Also the Nifty put-call ratio has been easing down "� and this is often the signal for a price decline.

Bulls & bears: Most stocks reflected the market mood and range-traded. Maruti is notable because the sale of the residual government stake at premium did nothing to shift the stock price.A few trends are noticeable.

There is some bullish action in two-wheeler stocks such as Bajaj and Hero Honda. Finance sector stocks including HDFC, HDFC Bank, SBI, Andhra Bank, ING Vysya have bottomed out and could be due for a bigger move next week.

High-volume action continues in Nalco but the price charts are difficult to decipher. Reliance Communication looks set to continue its run up, and there's bullishness apparent in JP Associates, Moser Baer, NDTV, and perhaps HCL Tech.

MICRO TECHNICALS

Bajaj Auto
Current Price: 2720.6
Target Price: 2690-2790 (Range trading)

The stock has seen strong volumes and climbed over the past three sessions. It has a potential target of about 2820 but it will run into selling pressure just above the current price. Be prepared for several high-volatility sessions with an intra-day price range between 2690-2790. Buy below 2710 and sell above 2765. If it closes above 2770, go long with a target of 2820 and a stop at 2755.

JP Associates
Current Price: 610
Target Price: 640

The stock appears to have bottomed at about 570 and found powerful institutional support with high volumes and good delivery ratios. It has the potential to bounce till around 640 before hitting strong resistance. Keep a stop at 605 and go long.

NDTV
Current Price: 379.95
Target Price: 395

The stock seems to have completed a breakout with volume expansion. It has a minimum target of 395 and it could move a bit further, until the 410 mark. Keep a stop at 370 and go long. Book partial profits above 392.

Rolta
Current Price: 463.95
Target Price: 480, 515 (Long-term)

The stock is consolidating after a sharp bull run from 325 levels in early April. It's generating high volumes and the performance is totally out of line with the generally weak sentiment for IT stocks. It has a near-term target of 480 and if it closes above that, it could move until the 515 level. Keep a stop at 455 and go long. Book partial profits above 478.

Reliance Petro
Current Price: 86.35
Target Price: 95

RPL saw a big spurt in price on Friday coupled to a massive increase in volumes, which definitely involved institutional buying since there was a delivery ratio of about 45 per cent. The stock completed a promising chart formation by closing over 84. It has a target of about 95. Keep a stop at 83 and go long.

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