Sentiment is positive

TRADING DESK/ MACRO TECHNICALS

Most indicators are giving buy signals. They have not moved into the overbought zone despite sharp gains during last week.

Prices surged after Republic Day with a very strong advance in the last two sessions of the week. The Sensex closed at 6419. 09 points for a week-on-week gain of 3.81 per cent.

The Nifty closed at 2008.3 points for a corresponding gain of 4.31 percent. The Defty was up 4.15 per cent as the dollar rose slightly against the rupee.

Breadth and background signals were good. The BSE 500 was up by 3.98 per cent. Volumes were very strong on Thursday and Friday when prices spurted. Advances outnumbered declines comfortably by the weekend.

Outlook: The indices are testing critical resistance at their current levels. Given a rise on expanding volumes, there is a good chance of a thrust above Nifty 2030 (Sensex 6450) that completes an upside breakout. If this happens, the previous all-time highs of Nifty 2120 (Sensex 6696) will be tested before the Budget.

Rationale: The short-term trend is obviously up. A price rise accompanied by volume is, in itself, an excellent signal. Most indicators are also giving buy signals and they have not moved into the overbought zone despite the sharp gains of this week.

That leads us to believe that the traditional pre-Budget rally is on. The target if the Nifty (Sensex) rises past 2030 (6450), would be 2160 (6800), which is a high all-time high.

Counter-view: It must be noted that the indices haven't yet crossed the last critical resistance. Until that barrier is overcome, the price lines won't confirm a breakout. If that resistance holds, and it might, and if bull interest fades, the market might run all the way down to 1900 (6100) again.

Bulls and bears: Most pivotal stocks are running in tandem with the market in that they have run 3-5 per cent and hit resistance levels late on Friday. But micro analysis suggests that quite a few are set to outperform and those might trigger enough positive sentiment to push the market up as well.

This list of outperformers includes ABB, Aptech, Asian Paints, Bharat Forge, BPCL, Gujarat Ambuja Cement, GNFC, GSFC, HDFC Bank, Hindustan Lever, HPCL, Mahindra, Mastek, Max India, Maruti, Oriental Bank, ONGC, P&G, Ranbaxy, Rolta, Saw Pipes, Sesa Goa, Siemens, Sterlite, Tisco and Wipro. Pretty obviously, sentiment is good across many sectors.

Another potential surge could come next week from non-ferrous metals - stocks like Hind Zinc and Hindalco have shown typical signs of volume expansion and price volatility without quite turning bullish as yet.

MICRO TECHNICALS

WIPRO
Current price: 699.95
Target price: 755

The stock has completed a bullish formation on volume expansion. Volume is an especially useful signal with Wipro since it's extremely closely held. The target would be in the range of 755 with significant resistance visible around 745. Go long, keep a stop at 670.

APTECH
Current price: 665
Target price: 710

There's been a jump in price from 550-665 inside a couple of sessions accompanied by a huge volume expansion. Technically speaking, the stock completed a bullish formation when it went past 615 and it has a minimum target of around 710. However, this sort of linear rise can often move much further, although it adds to the risk. Go long and keep a stop at 615.

GNFC
Current price: 68.55
Target price: 75.

The stock has completed a breakout accompanied by high volumes. Given a base at 62, GNFC should now have targets in the range of 75-plus.

Go long, keep an initial stop at 67 and use a trailing stop if the stock continues to run up past 75 since it could go much further. (GNFC's 'sibling', GSFC, could also produce good returns. There the target would be 115 with the stock placed at 107.5. )

MARUTI
Current price: 447
Target price: 465, 485

The stock has climbed past previous resistance at 440 without generating excessive volumes. It has completed a bullish formation as a result but with a warning signal attached. If we look simply at the price formation, it could have a target of 485.

However, the lack of volumes suggests that it may run out of steam at the level of 460-470 where it has seen resistance previously. Go long, keep a stop at 438 and book partial profits above 460.

M&M
Current price: 534.55
Target price: 590

The stock has completed a bullish formation along with good volumes. The target would be around 590 with potential resistance at about 555-560. Go long, keep a stop at 510, book partial profits around 560.

SESA GOA
Current price: 1254.75
Target price: NA

The stock had a big move through last week rising from 1055 to current levels in four sessions. It also saw volume expansion. It's difficult to set targets for this sort of chart formation. Go long and keep a trailing stop at 1230 if you're day trading. If you take delivery, keep a stop at 1185.

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