Intermediate trend reversal due

MACRO TECHNICALS

There isn't much breadth in the market due to a lack of retail participation "� the Diwali/post Diwali period normally features thin trading and net losses.

Settlement week went through net gains though the market breadth was thin. The Nifty closed up by 1.25 per cent at 3588.4 points. The Sensex was up 1.78 per cent, closing at 12454.42 points. The Defty rose 1.18 per cent as the rupee slid slightly.

Breadth signals were mildly negative by the weekend and volumes were average for a settlement week. The broad BSE 500 did outperform the Nifty however, by rising 2.19 per cent and the BankNifty shot up by 6.92 per cent. There was heavy mutual fund and FII buying through the week.

Outlook
There's strong resistance at the 3600-Nifty level. Momentum indicators are still positive, but barely so. The Nifty could breach 3600, but it's likely to top out somewhere between 3600-3650. After that, we could expect an intermediate correction that causes a 5-10 per cent pullback.

Rationale
We have seen net gains over the past 13 weeks and gains for 10 straight weeks running. The intermediate trend must have matured if the inability to penetrate resistance at 3600 is a valid signal.

The market must be due for an intermediate trend reversal, which could lead to a dip back down to 3315 levels. There isn't much breadth in the market due to a lack of retail participation "� the Diwali/post Diwali period normally features thin trading and net losses.

Counter-view
Through the past three years, the market has consistently managed to extend the uptrend beyond normal timeframes. The good GDP numbers and the dip in crude prices may provide a trigger for further gains along with the relief in the PAN card issue.

Bulls & Bears
The big sectorial gainer was banking though there was a sell off on Friday. There was a massive spurt in stocks such as Andhra Bank, HDFC Bank, ICICI, PNB, Corporation Bank, Oriental, Syndicate Bank, SBI and Vijaya Bank.

Give the sell off on Friday, there could be a further correction early next week but the sector looks clearly bullish in the context of the next 10 sessions.

Other financial stocks such as HDFC and LIC Housing also did well. Auto stocks such as Bajaj, Mahindra, Maruti also looked good. The trigger is probably the festive season discounts and rate cuts, which could boost volumes "� this logic certainly came into play wiuth the banks.

Apart from these, ACC and Grasim looked strong and so did the Tata flagships of Tata Chemicals, Tata Steel and Tata Power. There was scattered investment in Sail, GE Shipping and NDTV. Energy and refining PSUs such as BPCL, HPCL and Gail saw dips.

MICRO TECHNICALS

Bajaj Auto
Current Price: 2996
Target Price: 3150

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The stock has completed a breakout by moving past 2970 with some volume expansion. It has a likely target of 3150.

Keep a stop at 2970 and go long. The long-term target is in the region of 3500 so, it may be worth averaging up and taking delivery of some quantity with 6-10 week perspective.

GE Shipping
Current Price: 309
Target Price: 330

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A breakout was completed on high volumes when GE Shiping closed above 300 on Friday. It has a likely target of 330 and it could move further since the weekly price pattern suggests that a target of 360 is achievable. Keep a stop at 300 and go long.

HDFC
Current Price: 1533
Target Price: 1620

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HDFC started a breakout early last week with a big volume expansion as it closed above a strong resistance at 1420. It has a minimum target of 1620 so the move is quite extended. Keep a stop at 1520 and go long.

On the downside, if 1520 is broken, it will find the next reliable support at 1475. So you could consider shorting on an intra-day correction using 1520 as a pivot level.

NDTV
Current Price: 220
Target Price: 245

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The stock saw a strong volume expansion on Friday combined to a small uptick in the price. It has a likely target of 245 if it can overcome resistance between 220-225. Keep a stop at 214 and go long.

Tata Power
Current Price: 567.85
Target Price: 560

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The stock has risen steadily on an excellent volume expansion. It is hitting resistance at current levels biut the move has a likely target of 595. It could go further if the volume expansion is sustained. Keep a stop at 560 and go long.

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