The week saw a positive close on the bar charts even as trading was curtailed by a day due to unique circumstances. The market breadth was negative as the selling exceeded the buying process. In terms of tectonic shifts in the undertone, the banking sector dragged the markets lower and the technology stocks managed to bounce back.
The NSE Bank Nifty fell 0.25 per cent and the CNX IT rallied 5 per cent. The midcap index remained steady but firm as the retail buying interest remained lacklustre. The headline indices gained on the usual pre-expiry short squeeze and saw pockets of buying across select composite stocks. The true test of the directional strength will be seen in the coming week/fortnight as players take fresh positions going forward.
The FII’s withdrew Rs 746 crore during the week but that did not seem to have dampened sentiments significantly. The domestic players are beginning to take the FII pullout with less and less trepidation. The domestic institutional players on the other hand mopped up stocks worth Rs 502 crore. That indicates a balance of power to a certain extent and should this pattern persist, the impact of FII selling maybe muted in the coming weeks.
In terms of overseas triggers, the Dow Jones Industrial Average has established a support at 8,000 levels and must stay above the 8,950 levels in the coming week to trigger a fresh round of bullishness. The Nasdaq Composite on the other hand must stay above the 1,530 levels to remain bullish. As long as both these indices stay above the advocated levels, the domestic markets are likely to remain positive.
In terms of levels expected in the coming week, the BSE Sensex is likely to witness a support at the 8,300 levels and resistance at the 9,500 levels. The Nifty 50 is likely to witness a support at the 2,500 level and resistance at the 2,800 levels. Technical traders may note that both the indices have indicated “inside” formation – this weeks range is within the previous weeks range. That indicates an impeding move that is likely to be bigger than the recent week/s in either direction. Since the oscillators are showing an oversold reading on the charts, the dice is currently loaded in favour of the bulls for now. It is imperative that the traded volumes rally in tandem with the prices for the upmove to indicate sustenance. Unless triggers emerge to the contrary, remain biased towards the long side, though cutting back on exposure size is advisable.
MICRO TECHNICALS
RELIANCE INDS
Current Price: Rs 1,134
Target Price: N.A.
This heavy weight in the indices must trade above the Rs 1,035 levels to remain bullish. The exhaustion point in the coming 5 sessions is likely to be at the Rs 1,225 levels. Keep a note of the traded volumes on uptick sessions for telltale signs of distribution though. Once a long is initiated, a stop loss is suggested at the Rs 1,085 levels.
ITC
Current Price: Rs 174
Target Price: Rs 184-Rs 187
This scrip is facing resistance at the Rs 177 – Rs 178 levels and the same is also a six-week resistance on the charts. A breakout with forceful volumes and open interest expansion is needed to indicate a conclusive upthrust in the coming days. Long positions maybe protected with a stop loss at the Rs 172 level and profit target is expected at the Rs 184 – Rs 187 levels.
CAIRN INDIA
Current Price: Rs 142
Target Price: Rs 160-Rs 165
A sustained trade above the Rs 147 levels will see an upswing as the rising prices of crude oil and cheery market sentiments add up to an optimistic picture. The supportive technical evidence is positive and the upmove may extend to the Rs 160 – Rs 165 levels, which is the target for the coming week. Longs maybe protected with a stop loss at the Rs 135 levels.
SOBHA DEVELOPERS
Current Price: Rs 142
Target Price: Rs 160-Rs 165
The real estate sector is likely to continue to remain an under performer and this stock is weaker than many peers. Short selling is suggested at the Rs 95 levels and a stop loss advocated at the 102 levels. If the upmove is on poor volumes, the stop loss maybe edged higher. Expect to cover shorts at the Rs 75 – Rs 80 band.
