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| The market surged past the symbolic 5,000 Sensex mark before reverting into a consolidation mode. The week ended with the Sensex closing at 4,971.57 points for a net gain of 1.32 per cent. The Nifty closed at 1,592.05 for a gain of 2.32 per cent. The Defty ended ahead by 2.28 per cent with the rupee sustaining minor losses by weekend. |
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| After a rise on Monday, the next four sessions saw the market range-bound. Volumes eased off sharply along with the loss of bullish momentum. The Sensex showed a greater loss of momentum which is why there was a divergence in index values. Advances continued to outnumber declines and this positive divergence was evident in the BSE 500's disproportionately large rise of 3.32 per cent. |
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| Outlook: We have a clearly established pattern of range-trading inside well-defined support and resistance levels. The Sensex is moving between 4,945-5,135, and the Nifty is moving between 1,575-1,630. Movements inside this range could continue indefinitely until the market finds some sort of new trigger. Breakouts out past either resistance or support will be significant only if they come on high volumes. As things stand, a downside breakout looks marginally more likely but this is too marginal to bet on. |
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| Rationale: Range-trading indicates a period when bears and bulls are involved in almost equal numbers. After a run-up, there is always a period of either correction or consolidation. The low volumes of last week suggest that both bears and bulls are taking breathers and reassessing valuations. It is notoriously difficult to predict time and direction of breakouts from range-trading. Especially when the range in question is at a three-year-high. There is thus no recent price history to serve as an indicator. Also note that the statistics indicate strong buying in smaller stocks - this could filter upwards. It could also mean that the big players are booking profits while the small investor is getting enthusiastic. |
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| Counter-view: The optimists would note that the market is at the lower end of defined range and, hence, a small rise is likely early next week. This could change into a full-scale breakout if bulls come in with the uptrend. The market's long-term trend remains extremely bullish and that could be the critical factor. The optimist will read the bullishness in smaller stocks that way. |
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| Bulls and bears: Most majors were either bearish or stuck inside trading ranges. A motley crew of stocks saw unabatedly bullish sentiments and very few of these were in the elite Nifty/Sensex populations. Pharma stocks in particular were hit by waves of selling while most other sectors saw neutral or mildly bearish behaviour. |
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| Stocks that looked bullish included Amara Raja Batteries, Burroughs Welcome, Crompton Greaves, Dabur, Escorts, Essel Propack, GE Shipping, Hind Zinc, LML, Reliance Capital, Siemens, Sterlite, Sterlite Opt, Tata Telecom and Tata Teleservices. If the market does go into range-trading, there should be a rise of 2-4 per cent across the Nifty 50 in the early part of this week although this will be a move of short duration. Bear that possibility in mind. |
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| MICRO TECHNICALS |
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| ESSEL PROPACK |
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| Current price: 254 |
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| Target price: 285 |
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| The stock has been bullish since early-May. It moved up last week and registered decent volumes. It has completed a bullish chart pattern with a potential target in the range of 285-plus. It could take around three weeks to achieve that target but it should reach 265 by next weekend. There is reliable support only at 232, which means significant risk to the trader. Keep a stop at 232 and go long. |
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| AMARA RAJA BATTERIES |
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| Current price: 71.15 |
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| Target price: 80 |
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| The stock jumped on Friday with higher volumes. It has crossed serious resistance at about 70 and completed a bullish formation. The target projections would be in the range of 80-85 with probable resistance at around 75 and then at 79-80. Keep a stop at 67 and go long. The stock does have a long-term pattern of range-trading between 60-75. |
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| So, be prepared to book partial profits at around 75. |
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| HIND ZINC |
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| Current price: 102.35 |
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| Target price: NA |
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| The stock has risen sharply moving off the support of a 45 degree trendline to reach all-time highs. It is impossible to project targets with this sort of formation. The rising volumes and steeper price trend make the stock look worth trading despite the lack of predictability. There is reliable support at 87. Keep a stop there and take a delivery position with the intention of holding for two-three months. |
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| STERLITE OPTICAL |
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| Current price: 57.15 |
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| Target price: 75 |
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| The scrip is rising off a recent low in the region of 45. It has generated high volumes along with the rise. There is severe resistance close to the Friday closing price. But if the stock does close above 60, it could move to a near-term target of 75. Either go long with a stop at 54 or, wait for a close above 60. |
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| TATA TELESERVICES |
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| Current price: 14.5 |
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| Target price: 20 |
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| The stock is being picked ahead of group company Tata Telecom because it seems to have slightly better return prospects simply due to its low price. But both stocks are bullish and a trader could buy either. TTS is developing massive volumes and a bullish priceline. There is powerful resistance around 15. If that resistance is overcome, there will probably be a clear run until the 20 mark. Go long and keep a stop at about 13.5. |
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| (The target price and projected movements given above are in terms of the next five trading sessions unless otherwise stated.) |
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