Expect consolidation

MACRO TECHNICALS

The market is still neutral but moving closer to being overbought.

The market continued to rise through the week although the momentum slowed down. The Nifty closed at 2620.05 points, for a gain of 2.80 per cent. The Sensex closed at 8686.65 points for a gain of 2.55 per cent. The Defty gained 2.75 per cent as the rupee remained weak.

Breadth indicators were reasonable. Volumes were excellent especially on Thursday and Friday. Advances and declines were almost balanced on the NSE. The put-call ratio for the entire market eased to 0.62 from 1.0 - this drop means the market is still neutral but moving closer to being overbought.

Outlook: The uptrend might turn into a consolidation between Nifty 2525-2620 next week as it will face resistance close to the all-time highs of early October in the range of Nifty 2635-2670 and Sensex 8735-8825. It will need to generate massive volumes and excellent breadth to climb to a new record and that may be difficult.

Rationale: The first time the market hit these exalted levels, it generated strong volumes and excellent breadth. Nevertheless, it failed to overcome selling pressure.

It will need to generate even better stats this time round to sustain Nifty 2670-plus. Currently this looks unlikely. The implications of a double-top if resistance at 2670 cannot be beaten, is bearish.

Counter-view: A move past 2670 requires sustained volumes and excellent breadth. This could come only if retail investors, domestic institutions and FIIs are all net buyers in tandem. If this happens, the market could move to new highs.

Bulls & bears: The individual stock trends appear too scattered to drive a concerted movement in either direction.

There are two groups of stocks that could move up in concert. One is cement shares led by ACC and Gujarat Ambuja with Madras Cements and Grasim also potentially bullish.

The second group is selective auto-shares "� there's been buying in Ashok Leyland, Bajaj Auto and Tata Motors. Bank shares could go off the boil. Apart from these, there could be gains in BHEL, Gujarat Gas, Hindalco, Indian Hotels, Jindal Steel, Max India, Tata Finance, TCS and Wipro.

MICRO TECHNICALS

Gujarat Ambuja Cements
Current price: 78.9
Target price: 85

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The stock has broken out past critical resistance at 78.50 and closed above that mark on an excellent volume expansion. It has a target of about 85, which would be a new (split-adjusted) high. It's difficult to calculate targets without a previous trading history. But there's strong support just below the current price. Keep a stop at 77 and go long.

Gujarat Gas
Current price: 1245
Target price: 1270, 1370 (long-term)

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The stock has broken into a new zone with good volumes. The short term target is about 1270 and the long-term target (achievable over 25 sessions) should be about 1370. Keep a stop at 1215 where there is good support and go long. Book only partial profits at 1245 and take delivery if you can.

Hindalco
Current price: 136.55
Target price: 150

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The stock has bottomed, consolidated and moved up on excellent volumes. It has good support at 134 and a short-term target of 150. Keep a stop at 133 and go long. Book partial profits at 145 because there's a strong resistance there.

Tata Consultancy Services
Current price: 1527
Target price: 1570

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The stock has completed a bullish saucer formation and consolidated on high volumes. It has support at 1500 and a projected target of 1570. Keep a stop at 1500 and go long.

Tata Motors
Current price: 546
Target price: 560, 595 (long-term)

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The stock completed a bullish saucer formation by crossing 541 with strong volumes. It has a short-term target of 560 and a long-term target of 595. There's strong resistance between 550-560, which could retard moves towards the target. Keep a stop at 540 and go long. Book profits anywhere above 550 and go long again if it closes above 560.

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