Trend appears positive

TRADING DESK/ MACRO TECHNICALS

The rollbacks and clarifications in turnover tax rates brought some life back to the market. The Sensex gained 2.47 per cent, closing out the week at 5073.34 points while the Nifty gained 2.75 per cent and closed the week out at 1601.6 points. The Defty gained only 2.39 per cent as the rupee lost ground versus the dollar.

Breadth indicators were mildly positive. Advances slightly outnumbered declines; the put-call ratio was down from overbought to neutral levels. Volumes saw a perceptible increase in the last two sessions. The BSE 500 gained 2.67 per cent.

Outlook: There isn't a clear trend in the intermediate term but the short-term trend appears positive. This is not a very strong upmove (it was running into resistance around the closing levels on Friday). Next week could see prices held within the range of Sensex 5025-5150/Nifty 1600-1650. Closes above those levels would set up bullish intermediate-term formations.

Rationale: While prices advanced a fair amount towards the end of the week, momentum indicators like the ROC/RSI lagged or showed negative divergences. However, moving-average-based trend-following indicators like the MACD are clearly in buy mode. If the market closes clears of Nifty 1620/Sensex 5100, it will have short-term targets around Nifty 1665/Sensex 5230.

Counter-view: The blessing is that we don't see a pronounced downside in normal circumstances. However, a downturn could be triggered by political uncertainty, at home or abroad. There is solid support at Nifty 1560/Sensex 4950 and lower down at around Nifty 1530/Sensex 4775.

Obviously something like the Iraq hostage crisis or the Soren arrest warrant issue could impact sentiment unfavourably. On the other hand, corporate results have been excellent and the chart formations suggest a price-consolidation that has created a fairly solid base over the past six weeks.

Bulls and bears: The first-quarter results are probably the key market driver at the moment. Investment is clearly visible but it's also selective and stock-specific. Stocks that saw buying interest last week included Adani Exports, Amara Raja Batteries, Aptech, BPL, Colgate, CMC, Nirma, Nocil, SSI and Sail.

This scattershot scenario makes it difficult for top-down investment decisions. There's no obvious pattern here in terms of industry except perhaps for the software sector.

MICRO TECHNICALS

SSI
Current price: 178.5
Target price: 220

The stock has risen quite promisingly on high volumes. It is close to completing a saucer formation, and the completion would be confirmed if it closed above the current levels on Monday or Tuesday. The target for this saucer formation would be around 220. There is support only around 160 so, the risks in going long are significant.

AMARA RAJA BATTERIES
Current price: 65
Target price: 80

The stock has just completed a saucer formation with a semi-circular bottom and a huge volume expansion in the last leg. The short-term target for this bullish formation should be in the range of 77-80. Given the volume expansion, the stock could exceed the minimum targets. It has support around 58.5 - keep a stop around 58.

APTECH TRAINING
Current price: 45.5
Target price: 51

The stock has risen sharply and the move has been accompanied by a strong volume expansion. It has a price-target of around 51 and there is massive resistance above that level. The short-term move is likely to halt around those levels. However, there are early indications that the long-term trend has gone positive after a six-month period of decline. It may be worth holding a position for a period of around three months. Keep a stop at 40.

BPL
Current price: 49.5
Target price: 75

The stock has gone ballistic, rising from around 26 to current levels in about seven sessions. It has also seen a big volume expansion. There is a band of serious resistance between 50-54. If the BPL stock clears that resistance, it is likely to have a target of around 75-80. The volumes are encouraging. Keep a stop at 45 and go long.

COLGATE
Current price: 142.75
Target price: 160

The stock saw a big move on Friday, rising on high volumes. Colgate has bounced up by around 40 per cent in the last month and it has just completed a bullish formation, which has a short-term target projection of around 160-165. There is resistance around 148 and the trader could book partial profits at that level. Keep a stop at 135.

SAIL
Current price: 37
Target price: 44

The stock has just completed a bullish saucer formation on fair volumes. It has a short-term target of around 44 and it could have the potential to move much further. Keep a stop at 35 and go long.