Upmove likely

MACRO TECHNICALS

Although every session in last week saw significant volatility, the net change in prices was almost negligible. A sharp fall on Monday and another sharp fall on Friday canceled out the effect of three bullish sessions sandwiched in-between.

The Sensex closed at 5669.58 points, for a net gain of 0.25 per cent. The Nifty was up 0.46 per cent, closing at 1804.45 points. The Defty lost 0.09 per cent as the rupee was hit by election volatility and fears of a US rate hike.

Breadth signals were net negative by the weekend. Advances were considerably outnumbered by declines. Volumes were down. The Nifty put-call ratio was stuck in neutral territory. However mid-caps outperformed both pivotals and small stocks if the 0.94 rise in the BSE 500 is any indication.

Outlook: The last round of polling is due on Monday and results will be due soon after. That sets the stage for a big move, depending on the composition of the 14th Lok Sabha.

But while it's easy enough to predict a big move, it's difficult to come up with a confident take on market direction. The charts and background indicators are too close to call.

Nevertheless, I'll stick my neck out and suggest that an upmove is more likely. If the market does move up, it will probably rise to Nifty 1925/Sensex 6050 quickly. If, on the other hand, it does go down, it may hit Nifty 1675/Sensex 5400 before finding support.

Rationale: Fibonacci time-series calculations suggest that an upmove in late May is likely. Statistically, every election since 1989 has been followed by a bullish move - regardless of the composition of the house. However, there is no clear evidence in the charts to suggest that this pattern will hold.

Counter-view: The May Nifty futures are at a considerable discount to spot Nifty as are the futures of major stocks. This could be due to hedging by operators who are nervous about a hung parliament.

The behaviour of the derivatives market could provide a clue as to the direction in which the wind is blowing and it suggest the consensus opinion is down.

Bulls and bears: There are very few stocks that look capable of moving independently of the market. Textiles could be a long-term play - Arvind and Century Textiles look bullish.

Ballarpur is benefiting from the bullish paper cycle. Burroughs, Dr Reddy's Glaxo and Wockhardt are among several pharma shares that could stay bullish regardless of the overall market trend.

Sugar stocks saw enhanced volumes albeit prices didn't move up last week. But most stocks will move in tandem with the market's overall reaction to the election results.

MICRO TECHNICALS

BALLARPUR INDUSTRIES
Current price: 75
Target price: 95

The Indian paper industry's four-year traditional cycle usually tops around the time of the US presidential election. So far, things seem to be on course. Bilt has seen enhanced volumes and enhanced trading interest.

The stock is testing resistance at 76-78. If it closes above 78, it is likely to have a minimum move till around the 95 mark. There is fair support at 72. Go long and keep a stop at 72 or else, wait for a climb above 78 and then go long.

ARVIND MILLS
Current price: 61.9
Target price: 80

The stock seems to have completed a bullish reverse head and shoulders pattern with volumes expanding along the right shoulder.

This pattern is usually fairly reliable in terms of targets and the price-expectation would be around 80 in 10-15 sessions. There is resistance at 65-68. There is support at 57.5. Go long and keep a stop at 57.

CHENNAI PETRO
Current price: 168
Target price: 180

The stock saw small price gains in the last week although volumes weren't very high. The stock has seen a long-term bull trend and it has recently risen above a critical resistance at 165.

It should be a good long-term buy although the immediate price target would not be more than 180. Keep a stop at 165 - the erstwhile resistance will now play the role of support.

DR REDDY'S LAB
Current price: 910.8
Target price: 925/990

The stock fell continuously from 1465 to about 850 levels where it established support and started a technical recovery. It has climbed back past 900 and volumes spurted towards the end of last week.

There is resistance around 925 but if the stock rises above that level, it could climb to around 990 without much trouble. Keep a stop at 885 and go long.

WOCKHARDT
Current price: 335
Target price: NA

Post-split, the stock has seen a normal rise in volumes. Projections made immediately after splits carry larger risks and are prone to more errors.

However, the stock seems to have carried over its long-term bullish trend. It has a track-record of bucking the market trend, which could make it a good hedge in the near future. There's good support at 327, keep that as a stop.

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