Next target is 5,450

Resistance above 5,375

The market made net gains, and recorded a new 52-week high of 5,399 points (Nifty) before settling to close at 5,361.75 for a week-on-week gain of 1.35 per cent. The Sensex was up 1.36 per cent while the Defty rose 2.76 per cent on the back of a rupee surge.

Volumes improved in both cash and derivatives markets. For the first time after the Budget, domestic institutions and FIIs were both net buyers in unison. The BSE 500 was up 1.7 per cent while the Junior rose 1.8 per cent and the Midcaps was ahead 2.92 per cent.

Outlook: It looks as though the market has some upside left and a target of about 5,450 could be achieved next week. Right now, the Nifty is straining to overcome resistance in the 5,350-5,400 zone. This is week 10 of an intermediate uptrend so it may be close to maturity. On the downside, there is support in roughly 50 point intervals below the current price. The support at 5,200 seems particularly strong.

Rationale: The continuing pattern of rising peaks and rising troughs confirms the uptrend. The synchronisation of institutional attitude and the improved volumes and breadth are good signals. But there is a lot of resistance above current levels and in absolute terms, volumes aren’t great. So, the market could slog through a narrow range despite its apparent Northwards bias.

Intermediate trends generally last between 6-12 weeks though they can last longer if they are in phase with the long-term trend like this one. The last phase often sees a sudden explosion of volumes and a sharp rise. Barring such a volume expansion, the Nifty will be unable to overcome resistance above 5,450.

Counter-view: Momentum signals aren’t very good. The intermediate trend is nearly mature. A trend reversal next week cannot be ruled out. A short-term correction could pull the market down to support at 5,200. If it drops below that point, it would be prudent to assume that the intermediate trend is correcting though that wouldn’t be confirmed.

Bulls & Bears: IT stocks saw weakness and the CNXIT was down 0.55 per cent. This could be a danger signal since Infosys result kicks off the full year result season and the strong rupee has already led to cutbacks in expectations. It could have been even worse except for short-covering on Friday.

Financials were strong in general. So were a host of interest-sensitive engineering and construction businesses. Power equipment and cement were pretty strong as well. Signals were mixed in sectors such as real estate and metals where movements appear to be stock-specific rather than sector-driven. FMCGs were weak with persistent selling in Hindustan Unilever and ITC. Telecom started strong and closed weak. The sector could see more news-driven volatility as 3G auctions play out. Energy is also volatile in the face of rising crude prices. Reliance Industries looked strong however.

MICRO TECHNICALS

INFOSYS TECH
Current Price: Rs 2,676
Target Price: NA 

The stock has a bullish long-term pattern of higher tops. It’s reacted from Rs 2,870 to a low of Rs 2,600 and consolidated ahead of results. A move above Rs 2,700 could mean a rise till Rs 2,800. A slide below Rs 2,660 would push it back till Rs 2,600. Keep a stop at Rs 2,660 and go long. Increase the position above Rs 2,700 with a target of Rs 2,800. If it drops below Rs 2,660, “double-minus” with a stop at Rs 2,675 and target of Rs 2,600.

 

INDIABULLS REAL ESTATE
Current Price: Rs 163.70
Target Price: Rs 140 

The stock has a bearish pattern of falling tops along a steep trend-line. If that persists, the current uptrend should reverse at resistance above Rs 165. On the downside, the next low should be between Rs 140 and Rs 145. Keep a stop at Rs 167 and short. Increase the position below Rs 160. Start booking profits below Rs 145 and reset the stop to Rs 150.

 

PETRONET LNG
Current Price: Rs 86.15
Target Price: NA 

The scrip has jumped on high volumes, clearing resistance between Rs 80 and Rs 84 in one session. It has a target of Rs 90-plus, but this is a new 52-week high and lack of recent trading history increases error margins. Keep a trailing stop at Rs 82 and go long. Move the stop up 5 units for every 5 unit rise.

 

LIC HOUSING
Current Price: Rs 906.60
Target Price: Rs 930 

The stock jumped on enhanced volumes on Friday. It cleared resistance between Rs 890 and Rs 900 mark and it could have an upside target of Rs 930-935. Keep a stop at Rs 900 and go long. Start booking profits above Rs 930.

 

SBI
Current Price: Rs 2,106
Target Price: Rs 2,060 

The stock is hitting resistance just above current levels. It doesn’t have strong volume action. It could react till Rs 2,050-2,060 levels in the next correction. Keep a stop at Rs 2,115 and go short. Increase the position below Rs 2,090 and cover between Rs 2,050 and Rs 2,060.