Expect consolidation

MACRO TECHNICALS

All signals suggest that trading will continue to be optimistic next week.

The bulls seem to be back in business after a 3-week hiatus. The Sensex gained 4.94 per cent this week closing at 8471 points. The Nifty was up by 5.36 per cent and closed at 2548 points. The Defty gained only 3.93 per cent "� an indication of the relentless pressure on the rupee.

Breadth indicators also improved. Advances outnumbered declines by a healthy margin. The broad BSE 500 was up by 5.12 per cent. Volumes were reasonable without hitting the extremely high levels of the September bull-run.

Outlook: All signals suggest that trading will continue to be optimistic next week. Momentum indicators are up, price lines are up. However, there's stiff resistance between 2535-2590, that could force a consolidation rather than a straightforward climb.

Rationale: The intermediate trend seems to have turned bullish again. However the previous trading above the current level was extremely high-volume. This could cause resistance, since there will be a fair amount of supply.

Counter-view: Through the bull-market that's been in force since May 2004, there have been very few periods when consolidation has occurred. Mostly it's been straight up, occasionally straight down. That pattern could continue and obviously up is more likely than down. On a correction, the Nifty would drop in the 2475-2535 zone.

Bulls & bears: The feeling that there will be continued bullishness is reinforced when we examine individual stocks. Several groups of stocks look good. These include auto and two-wheeler stocks such as Bajaj, Hero Honda, Maruti and Tata Motors.

Banking stocks such as ICICI, SBI, PNB and OBC also look strong. Power sector stocks such as ABB, Bhel, Reliance Energy, Tata Power and NTPC have spurted. There seems to be some speculative action in oil PSUs such as BPCL, HPCL, IBP and Kochi Refineries.

IT-majors Infosys, Satyam and Wipro are also developing interesting price lines. Apart from these, there could be isolated winners such as Bharti Tele, GAIL, Nalco, GE Shipping and I-flex.

There are more than enough heavyweights in this list to ensure that the indices will keep climbing. However trading in smaller stocks could be thin.

MICRO TECHNICALS

Hero Honda
Current price: 806
Target price: 820

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The stock has a 3-session target of about 820. It's already at an all-time (adjusted-price) high. There's a chance that it could climb further as well. Keep a stop at 780 and go long, booking partial profits at 820 and averaging up.

IBP
Current price: 542
Target price: 565,625 (long-term)

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The stock has cleared major resistance at 528 and made a breakout on high volumes. While there's heavy resistance above the current levels, it has a potential target of 620.

In the short-term, expect a price of 565 to be achieved sometime in the next five-sessions. This is highly speculative and the downside if support at 428 is broken could be considerable. Keep a stop at 528.

ICICI Bank
Current price: 515
Target price: 535

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The stock has consolidated nicely and started developing higher volumes. A rise off the base could push it to 525, where there's some resistance. If the market trend is good, ICICI could move till the 535 mark very quickly. Keep a stop at 500 and take delivery.

Oriental Bank
Current price: 248
Target price: 267

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OBC has also consolidated at near the current price and started developing higher volumes. There's resistance between 252-258. If that is cleared, the stock could move till 267. There's solid support at 240. Keep a stop there and go long.

Tata Power
Current price: 438.6
Target price: 460

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The stock has just completed a bullish saucer formation albeit on low volumes. There's good support at 432. The target would normally be around 470 but there's strong resistance at 460.

Due to the low volumes and the strong resistance, the upmove is likely to terminate there. Keep a stop at 432 and go long, booking at least partial profit at 460.

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