The support at 2,870 is quite strong but if that is broken, the market is likely to slide till 2,750.
Another week of narrow range-bound trading saw the market register some gains. The Nifty closed at 2,948 points for a gain of 3.7 per cent while the Sensex closed at 9,634 points for a gain of 3.6 per cent. The Defty gained 3.8 per cent in a week when the rupee saw very little movement.
Both FIIs and local institutions were net buyers albeit in small amounts. Volumes remained low and advances and declines were almost balanced. The BSE 500 did gain 3.6 per cent and large and mid-caps stocks did well with the Junior and the Midcaps-50 both beating the Nifty.
<B>Outlook:</B> Given that the market has managed to stay above 2,870, it appears likely to achieve its upside target of 3,100-3,150 before it sees another downslide. The support at 2,870 is quite strong but if that is broken, the market is liable to slide till 2,750 at the minimum and more likely, 2,550.
<B>Rationale:</B> The market has traded two ranges since the October low of 2,250. The lower range has been 2,500-2,850. The upper range has been 2,850-3,150. Since it’s held above 2,850 through the past week, it’s liable to trade up to the top of the upper range. Most indicators are neutral or mildly biased, indicating a continuation pattern.
<B>Counter-view:</B> Low volumes and poor advances/declines ratios are generally indicative of a weak market and of course, the major trend is bearish. Range-trading patterns are also notoriously difficult to read. A collapse till 2,500 would not be unexpected. Certainly traders have to be prepared for a drop till 2,750.
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<B>Bulls & Bears:</B> One reason for expecting the uptrend to continue was a generally comfortable set of chart patterns across the F&O stocks. There were quite a few bullish looking pricelines and nothing that looked terribly bearish.
Banks were key drivers of the uptrend with the BankNifty gaining over 5 per cent on the back of bullish action in SBI, PNB and Syndicate Bank. The CNXIT saw nominal change, rising by 0.3 per cent. Educomp was the only outperformer in this space.
Auto companies led by M&M and Hero Honda ended positive while telecom stocks like Idea and RComm also did well. Winners were scattered almost at random across other sectors and included majors like ACC, Bhel, L&T, Lupin, PGCIL Shree Renuka and TV18.
<B><font color="#990000">MICRO TECHNICALS</font></B>
<B>ACC</B><BR>
<B>Current Price:</B> Rs 579<BR>
<B>Target Price:</B> Rs 600
Strong volumes have driven an uptrend from the Rs 480 levels. There was a mini-breakout when the stock closed above resistance at Rs 560. This should yield a target of somewhere between Rs 600- Rs 620 and there is a band of resistance in that area. Keep a stop at Rs 570 and go long. Start booking profits above Rs 600.
<B>Educomp</B><BR>
<B>Current Price:</B> Rs 2,090<BR>
<B>Target Price:</B> Rs 1,800
The stock has shot up on massive volumes. It has hit a key resistance and is likely to decline back to support at around Rs 1,800. If there is a breakout and close above Rs 2,150, the breakout could push the priceline till Rs 2,400. Keep a stop at Rs 2,140 and go short with a target of Rs 1,800. Book profits below Rs 1,850.
<B>L&T</B><BR>
<B>Current Price:</B> Rs 702<BR>
<B>Target Price:</B> Rs 725
The stock has started generating useful volumes and moved up above a key resistance at Rs 690. It has a minimum target of Rs 725 and may be able to sustain the momentum until Rs 745. Keep a stop at Rs 690 and go long. Book partial profits at Rs 725-plus.
<B>M&M</B><BR>
<B>Current Price:</B> Rs 321<BR>
<B>Target Price:</B> Rs 360
The stock has seen a sharp rise backed by a major volume expansion. It’s testing resistance at current levels and on the basis of the volumes, its liable to breakout. The upside target would be about Rs 360. Keep a stop at Rs 310 and go long.
<B>Power Grid</B><BR>
<B>Current Price:</B> Rs 94<BR>
<B>Target Price:</B> Rs 102
The stock has seen volume expansion and a price rise. This may be partially driven by fund buying due to its index inclusion. It should be having a target in the region of Rs 100-Rs 102. Keep a stop at Rs 92 and go long.