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| The market broke on Thursday after hitting new intra-day peaks early in that session. The Sensex retracted from a high of 3750 to close on Friday at 3647.58 with a week-on-week loss of 0.78 per cent.
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| The Nifty hit a double-top at 1175 before dipping to a close of 1140 and a w-o-w loss of 1.86 per cent. The Defty lost 1.88 per cent as the rupee eased marginally.
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| Breadth was weak, with declines far outnumbering advances. The Nifty put-call ratio corrected from an extremely overbought zone at 0.27 to a nearly neutral 0.39 by weekend. Volumes stayed at reasonable levels despite all the volatility and weakness.
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| Outlook: Expect further volatility and net losses for several weeks. This reversal has all the signs of an intermediate-term one.
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| The market has moved below previously comfortable trading levels; the Nifty has performed a bearish double-top and the Sensex has receded violently after achieving a projected target.
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| Also, the timing seems just about right after 11 weeks of successively higher prices. If this is the first correction in a long-term bull market, it won't last too long.
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| There should be support flowing in within 4-6 weeks. The likely maximum downside targets are between 1050-1100 Nifty/Sensex 3325-3450 inside that timeframe.
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| But early next week, expect continuous choppy trading through the range of 3600-3750/1125-1175. The support levels at Sensex 3590/Nifty 1125 haven't been broken yet and both are liable to be tested.
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| Rationale: The uptrend has been in force for 11 weeks -- that's close to maximal extension even for the first wave of a new long-term bull market.
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| Momentum continues to be weak as evinced by an ROC that has dipped just as sharply as the market. Our peak target projections were in the range of 3750/1200 and the market actually hit 3750/1175, which is close enough to projections.
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| Counter-view: The market hasn't quite confirmed an intermediate reversal. That would be confirmed only with closes below the 3600/1125 level, when we would see definitively lower bottoms.
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| If the indices hold above those levels, it's possible that we will see range-trading for a few weeks followed by another advance.
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| But an immediate surge past the 3750 level without an intervening cooling-off period does look very unlikely.
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| The only trigger for that happening would be another burst of optimistic buying from the big operators and FIIs. With an impending Sebi investigation, that's a farfetched call.
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| Bulls and bears: Trading saw much sector rotation. The eagerly awaited quarterly results was one key.
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| Another factor was disinvestment-related sentiment and a third was CAS policy decisions. The fourth element was a weak Nasdaq - this meant that almost every Ice stock with the exception of Infosys was hammered ruthlessly.
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| Most PSUs also got hit last week. The exceptions were Hindustan Zinc and SAIL, which weakened on Friday but still saw net gains.
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| Some big stocks look as though they could withstand general bearishness. These include ABB, Alsthom, Apollo Tyres, Asian Paints, Colgate, Indo Gulf, L&T, P&G, Telco, Tisco and UTI Bank.
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| MICRO TECHNICALS
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HINDUSTAN ZINC
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Current price : 46.15
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Target price: 60
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| The stock is shooting up on huge volumes due to specific news. It has just exceeded a projected target at 45 and done so on excellent demand.
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| On long-term weekly charts, the stock has recently completed a bullish saucer formation on higher volumes. This would suggest a projected target in the 61-62 zone.
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| Keep a stop at 40 and take a long-term position, being prepared to hold for upto 8 weeks or until the target is reached.
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ABB
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Current price : 371.35
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Target price: 395
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| The stock is exhibiting a mildly counter-cyclical trend. It peaked about a fortnight ago when it completed a bearish double-top formation peaking around 395 for the second time in quick succession.
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| It then reacted till it hit 360 on Thursday whereupon it started a recovery. The recovery is coming on decent enough volumes and a run up till around the 395 level is possible. Go long and in practice, book profits anywhere above 385. Exit if the stock falls below 360.
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L&T
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Current price : 274.35
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Target price: 290
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| The stock continues to exhibit a stable bullish trend with decent volume to back a rising trendline. The pattern doesn't lend itself to reliable target projection however.
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| We are suggesting a target on the basis of the next powerful resistance, which is placed around the 290-295 mark. That resistance could well be broken but it will halt the uptrend for a while at least.
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| Go long, keep a stop at 258. Be prepared to hold for 4-6 weeks and to average up, booking only partial profits if a target of 290 is achieved.
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P&G
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Current price : 451.45
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Target price: 465
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| The stock has maintained a solid trading range despite all the market volatility. It is capable of moving to around 465 before it loses ground on selling pressure.
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| The downside is only until support at 445. Go long and try and take profits when it moves to the top of the 445-465 trading zone.
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UTI Bank
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Current price : 75.25
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Target price: 70-76
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| The stock has shown a long-term bullish trend. It is likely to consolidate between 70-76 before it moves up further.
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| There is very solid support around 68-70. The stock looks worth accumulating for the long-term. Try and pick it up if the price declines.
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| (The target price and projected movements given above are in terms of the next five trading sessions unless otherwise stated) |
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