Expect resistance at 8075-8150

MACRO TECHNICALS

If that resistance is broken early this week, there's an excellent chance of continued bullishness.

Despite low volumes and a truncated trading period, prices made an impressive recovery this week. The Sensex closed at 8072.65 points for a gain of 5.03 per cent. The Nifty rose 4.45 per cent to close at 2419.05 points. The Defty rose 4.29 per cent as the rupee remained weak.

Breadth signals were mixed. The low volumes can be discounted given the week's schedule and the token nature of Diwali trading. However advances and declines were almost balanced with marginally more in the way of advances. The market put-call ratio dropped a bit. The BSE 500 gained 4.6 per cent and momentum indicators went in to buy mode.

Outlook: The market is poised below a key band of resistance at Sensex 8075-8150 (Nifty 2425-2450). If that resistance is broken early this week, and the indices close near or above the top end of that band, there's an excellent chance of continued bullishness. However, its a toss up whether the resistance will be broken.

Rationale: Leading momentum indicators (RSI, ROC) are positive again but lagging indicators like the MACD haven't gone positive yet. We may assume that volumes will improve, which will also be positive. A breakout past 2450 would set a target of 2550.

Counter-view: In absolute terms, volumes remain low and a major expansion will be required to mop up supplies at higher levels. The intermediate downtrend started in early October and it may not have finished yet. If not, we will either see range-trading between 2350-2425 or a test of support at 2300 again.

Bulls & bears: Most major stocks are poised close below respective major resistances- they will either move up together as a group or they won't. A few possibilities do stand out.

Cement stocks such as ACC, Grasim, GAC were among the first to get a hammering; these are now recovering quickly on respectable volumes. The housing finance majors HDFC and LIC Housing Finance held out pretty well as defensive stocks and these could continue to outperform.

There are a few other stocks which appear to have made individual breakouts "� these include ITC, Kotak Mahindra Bank, MTNL and Satyam. Tata Steel appears to have hit a reliable bottom.

MICRO TECHNICALS

ACC
Current price: 464.7
Target Price: 480

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The stock is stuck just below a critical resistance at 467. If it closes above that level it would set up a minimum target of 480 "� this could also happen on an intra-day basis. There's been reasonable volume generation and there's strong support at 458. Keep a stop at 458 and go long.

ITC
Current price: 125
Target Price: 132

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The stock has an engulfing pattern in that Wednesday's high-low range was wider than Tuesday and it closed up. It has also attracted strong volumes. There's good support near the current price and a target of 132. Keep a stop at 123 and go long.

LIC Housing finance
Current price: 200
Target price: 206, 215

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The stock has strong defensive character and it is testing resistance between 200-206. If it closes above 206, it would have a target of 215. Accumulate with a stop at 195. You may need to take delivery for upto 10 sessions for that 215 target to be achieved.

Satyam
Current price: 630
Target price: 650

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The stock has made a clear breakout with some volume expansion. The target should be about 650 and there's support at about 610. Keep a stop at 610 and go long. Unfortunately, although there's an excellent upside, there is also the risk of extreme daily volatility and a wide high-low range.

Tata Steel
Current price: 379
Target price: 385, 392

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The stock seems to have just hit a reliable bottom. It has excellent support at 372 and it seems to have turned around on good volumes. On the upside, any buying will take it to around 385 and it could test resistance at 392. Keep a stop at 372 and go long with partial profits to be booked above 385.

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