Bearish in the short-term

MACRO TECHNICALS

The market could consolidate in the range of over 100 points. Nevertheless, the long-term trend is bullish.

The market made a strong upmove on Monday and followed through with three sessions of further gains before there was a sell-off on Friday.

The Sensex ended the week with a net gain of 3.01 per cent and a closing value of 11279.96 points. The Nifty was up 3.74 per cent at 3402.55, while the Defty did even better with a 3.89 per cent gain.

Breadth signals were good throughout with advances consistently outnumbering declines. While volumes were also excellent throughout, the sell-off on Friday dwarfed the other four sessions. The broad-based BSE 500 rose by 3.144 per cent w-o-w, but smaller shares delivered lower returns than mid-caps.

Outlook: It appears that the market may consolidate between Nifty 3325 and 3450 (Sensex 11085 and 11400) over the next three sessions.

This implies that the trend is weighted slightly in favour of a downside in the extremely near term of the next two sessions. Any breakout outside this range will be significant and the long-term trend remains very positive.

Rationale: The sell-off on Friday came on massive volumes, but there is strong support to the Friday closes in many stocks, and several pivotals moved up through Friday as well.

The background breadth indicators are okay. But momentum indicators like the RoC have turned down and the RSI and the Nifty put-call ratio are both in overbought zones. This makes a short-term dip a little more likely.

Counter-view: The trend has been positive pretty much since mid-January. FIIs remained positive through the Friday profit-taking and so did domestic mutual funds.

Most of the selling came from traders who were readjusting exposures in the new settlement. There are chances that another buying spree is around the corner.

Bulls & bears: Stay out of smaller stocks in the near term "� more than poor advance-decline ratios, I would be worried about a sudden drop in liquidity in smaller stocks. In the top 100 segment, there are quite a lot of bullish pricelines.

Even on Friday, stocks as diverse as Bajaj Auto, Bharti Tele, Bhel, Bharat Forge, Cipla, Colgate, CMC, Corporation Bank, Gail, Grasim, HDFC Bank, IDBI, IFCI, IPCL, Jet, NDTV, SCI, Sterlite, Tata Chemicals, Tata Steel and TVS moved up.

There were many losers in the Nifty onFriday as well "� including biggies like Infosys, ITC and Reliance but most of these have come close to clearly defined supports as well.

MICRO TECHNICALS

ITC
Current Price: 195.15
Target price: 185

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The stock saw a bearish engulfing pattern on Friday "� the high-low range was larger than on Thursday and the stock lost over 3 per cent in a single session.

There is a chance of a pullback till the 185 levels if support at 192 is broken. Keep a stop at 200 and go short.Cover below 186.

IDBI
Current Price: 78.3
Target price: 85

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There appears to be speculative accumulation at the current price and the stock has developed massive volumes.

There's room for an upward move till around the 85 levels though there will be strong resistance above 82.5. Keep a stop at 76 and go long. Book partial profits above 82.

NDTV
Current Price: 257.75
Target price: 270

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The stock has moved sharply on massive volume action in the past three sessions. Depending on how one reads the pattern, the minimum target could be either 270 or 290 (the weekly chart formations suggest that 290 is the likelier target). Keep a stop at 245 and go long. Be prepared for fairly high volatility.

Sterlite
Current Price: 1751
Target price: 1800

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The stock has seen an acceleration of an already bullish trend in the past three sessions. It has a five-session target of 1800 and it may move quite a long way beyond that, given excellent volume action and good formations on weekly/monthly timeframes.

Keep a stop at 1700 and go long "� unfortunately Sterlite has moved so fast, there is not reliable support closer to the current price.

Tata Chemicals
Current Price: 263.65
Target price: 272

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The stock made an upmove with very strong volumes on Friday. It has a likely target between 272-275 in the short-term It could move beyond 275 as well.

Keep a stop below support at 262 and go long. May also be worth accumulating a position with a four-week perspective since there's likely target of 290-300 in that timeframe.

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