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| The uptrend broke on Thursday and the market saw a significant, widespread decline on Friday. The Nifty dropped by 1.88 per cent last week, closing at 1372.1 points.
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| The Sensex was down 1.45 per cent at 4305.91 points. The Defty was down 1.41 per cent, being buoyed by the strong rupee.
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| Breadth signals moved downwards. Declines outnumbered advances by a very wide margin. Volumes eased off during the week. The BSE 500 was down by 1.02 per cent. The put-call ratio was around 0.36 by the weekend - this is neutral territory.
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| Outlook: As of now, the short-term trend is negative. The intermediate trend may still be positive. Or, this could be the first sign of an intermediate trend reversal after 17 bullish weeks.
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| Next week may see very narrow range-trading or it may see further declines. Immediate bullishness seems unlikely; we would need breakouts past Nifty 1430/Sensex 4475.
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| We don't have a confirmation of an intermediate trend reversal. The market has resistance in the range of 1390-1430 Nifty/4370-4470 Sensex. It could find support between 1350/4250 and the current levels.
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| Closes below 1350/4250 would be significantly bearish, while range-trading between 1350-1430/4250-4475 would leave everyone uncertain about the future.
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| Rationale: The market has shrugged off earlier short-term corrections including the one-session crash after the blasts. But a trend reversal is more than a month overdue.
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| Breadth and indicator signals suggest that dips are now more likely than further rises. The key FII investment numbers eased off this week - if these don't pick up, the market is surely headed down.
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| Any intermediate correction could pull the market down to 1275/3950 levels over four-six weeks. A period of extended range-trading would also give big players time to make up their minds.
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| Counter-view: If the FIIs have merely taken a break from their frenetic buying because of the 9/11 anniversary, next week will see the market bounce again.
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| There will be sustained selling at the current price-range because investors were stuck at these levels in three previous bull-market peaks.
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| The market needs to clear 1430/4475 with substantially improved volumes to signal a continuing bull-market. If that upside move happens, the rally could continue until Diwali.
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| Bulls and bears: Declines far outnumbered advances this week. Traders can look for the odd bullish stock with the strength to oppose the prevailing trend. They can also look for potential shorts or stocks that have corrected to solid support.
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| Few big stocks fit into the overtly bullish category. Such a list would include Asian Paints, Finolex, HCL Info, Hindustan Zinc, Indo Gulf, Punjab Tractors, Shyam Telecom and SSI. Shorting into a market, which does not yet have a confirmed downtrend, may be pretty dangerous.
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| There are a lot of stocks poised on good support levels following a decline. These could include scrips like ABB, Amara Raja, BSES, Hughes Software, IDBI, Max India, Nirma and Tata Finance. Most of the Index heavyweights are either flat or bearish.
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| MICRO TECHNICALS
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PUNJAB TRACTORS
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Current Price: 192.35
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Target price: 225
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| The stock has formed a shallow inverted head and shoulder formation and made an almost classic breakout in the past week. It could have a projected target of 225 if the formation holds.
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| The only sign of worry is the lack of volume expansion as the stock has risen. Keep a stop at 185 and be prepared to hold the position for about 4-6 weeks or until the 225 target is achieved.
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FINOLEX
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Current Price: 137.25
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Target price: 145
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| The stock has moved out a trading range climbing steadily on excellent volumes. It shows a clearly bullish formation on weekly charts, which suggests that the long-term trend went bullish sometime in July.
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| There is likely to be massive resistance at around 145. If the stock does close above 145, it is likely to start trading in the range of 145-150. Go long and book profits at 145. Keep a stop at 130.
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SHYAM TELECOM
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Current Price: 58.55
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Target price: 66
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| The stock has almost completed a bottoming formation that is more easily visible on long-term weekly charts. It has started to pick up volumes as it has climbed out of what could eventually become an inverted head and shoulder formation.
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| There is strong resistance at 66, and less powerful resistance at 61. If the stock closes above 68, it could run a lot further. It would be prudent to go long, keep a stop at 55, and book profits around 66.
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SSI
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Current Price: 138.45
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Target price: 155
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| The scrip has completed a bullish saucer formation with a massive volume expansion. The projected target would be in the zone of about 155.
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| There is also historic resistance at those 155 levels and it would be likely for selling pressure to build up. The stock has massive daily fluctuations. Keep a stop at 130 and book profits at 155.
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TATA FINANCE
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Current Price: 38.45
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Target price: 44
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| The stock rose from 14 in early April to a peak of 62 in early August before going through a sharp correction. It closed at 38-39 levels last week - a retracement of almost exactly 50 per cent of the previous bull-run. The correction has created a falling wedge, which is usually a bullish formation.
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| Volumes have started picking up in the last couple of sessions as the scrip has consolidated. It seems safe to go long with a stop at about 37.
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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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