| |
| The market went through a two-day mini-correction followed by another surge as last week closed. The Sensex closed at 3883.76 for a gain of 1.8 per cent. |
| |
| The Nifty closed at 1222.65 points for a larger gain of 2.25 per cent. The Defty rose by 2.70 as the rupee hit sub-46 levels versus the greenback. |
| |
| Breadth indicators actually improved as the market went up. Advances outnumbered declines by a healthy margin. Volumes remained consistently high. The put-call ratio rose from very overbought levels to a mildly overheated zone. The BSE500 rose by a big 4.46 per cent. |
| |
| Outlook: The indices broke through several critical resistances last week. As such, it could continue to rise through most of next week. |
| |
| The short-term pattern is bullish enough to suggest the market should hit Nifty 1250/Sensex 3950 levels before it sees another correction. However, the uptrend has lasted far too long for comfort. |
| |
| The likeliest short-term move is indeed a further rise but there will be high volatility and any correction could turn into an intermediate reversal. |
| |
| Rationale: Momentum indicators such as the ROC and RSI have all shown negative divergences during the last two peaks. While the indices have moved higher, these oscillators have not. |
| |
| This is usually a sign of impending reversal and the rally is, in that sense,, running on reserve fuel. Upside could be 1250/3950, downside projections in case of a trend reversal would be 1170/3700. It is quite likely that the market will also continue to range-trade between 3750-3950/1170-1250. |
| |
| Counter-view: As the above indicates, I don't have much confidence in likely market direction next week! The likeliest direction seems a continuing uptrend but this is only marginally more likely than either range-trading through a fairly wide range or a sharp trend reversal. |
| |
| If there is indeed a fall, the downside move will be larger than the rise in the case of the more likely uptrend. |
| |
| Let's quantify: There's a 40 per cent chance of a rise of 70 Sensex/25 Nifty points. There's a 30 per cent chance of range-trading through plus/minus 100 Sensex/70 Nifty points of Friday closing. There's a 30 per cent chance of drops of 200 Sensex/75 Nifty. |
| |
| Bulls and bears: The bullishness on Thursday and Friday was driven by the energy and petrochemicals sector and also by assorted PSU stocks in other lines of business. |
| |
| BPCL, Chennai Petro, IOC, ONGC, Bhel, IPCL, Reliance, SCI and SAIL were in the forefront of the rally. A lot of other stocks also did well and looked capable of further uptrends. |
| |
| ABB, Amara Raja Batteries, Bank of Baroda, BASF, Reliance Energy, Cipla, Greaves, Dabur, Dr Reddy's, Grasim, Hind Lever Chemicals, Nestle, Siemens, Sterlite Opticals, Tata Chemicals, Tata Mot ors, Tisco and VSNL were among scrips that either rose sharply or recovered from lows. |
| |
| MICRO TECHNICALS |
| |
| KOCHI REFINERIES |
| |
| Current price: 108.85 |
| |
| Target price: 125 |
| |
| Kochi Refineries shot up on very high volumes last week. It was previously quite an illiquid stock and, given the change in the nature of trader-perception, it is difficult to project reliable targets |
| |
| STERLITE OPTICALS |
| |
| Current price:58 |
| |
| Target Price: 68 |
| |
| The scrip seems to have just reversed out of a long-term bear phase. It has improved momentum indicators and it has just climbed above the benchmark 200 Day MA. |
| |
| This has occurred on high volumes, which tends to confirm the trend reversal. The projected short-term targets would be in the range of 68-70. Historically this is a highly volatile share, so stop would have to be set around 48 to avoid being triggered by normal daily volatility. |
| |
| CROMPTON GREAVES |
| |
| Current price: 84.8 |
| |
| Target Price: 87 |
| |
| The stock has almost completed a bullish saucer formation on good volumes. There is a critical resistance at 87. If it closes above that mark, the stock could move to 100 within a very short time period. |
| |
| In the longer term, a rise past 87 would also confirm a long-term bull run on the stock and it could rise far higher over the next 6-12 months. |
| |
Either wait for a close above 87 or take a long position and be prepared to add to it above 87. Keep a stop at 80, if you
|
