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| Prices eventually went North after a week of high volatility. The Sensex ended at 4382.57 points, with a gain of 3.92 per cent. The Nifty was up 4.90 per cent at 1386.95 points.
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| The Defty rose even more sharply, closing at 1047.7 points for a gain of 5.15 per cent. The rupee strengthened again versus the dollar.
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| Breadth signals ended on a high but there were a couple of causes for concern. The number of advances on Friday far outweighed the number of declines. Volumes were low, especially on Monday and Tuesday.
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| The highest volumes were seen on Thursday, when prices plunged. The other cause for worry was that the put-pall ratio dipped to 0.28, which is close to the dangerously overbought zone.
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| Outlook: Next week's outlook is very difficult to judge. This sort of choppy trendless trading could resolve in any direction.
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| My bet would be a few more sessions of intra-day volatility and range-trading with the market moving inside 4100-4400/1285-1420. The implication of that is: Gains early in the week, followed by declines and recoveries.
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| There is resistance above current levels at 4430/1420. There is support starting at 4100/1285. The market could see volatility within that range of 4100-4430/1285-1420 leading to a continuation of choppy range-trading.
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| It could spurt above 4430/1420 in which case, the bull-run continues. It could drop below 4100/1285, in which case the intermediate downtrend will be confirmed.
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| Rationale: The lack of volumes is one sign that the market hasn't yet made up its mind or is mildly bearish despite the sharp climb on Friday.
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| I suspect any breakout will be accompanied by higher volumes. Momentum is neutral. Oscillators such as the RSI haven't hit extreme levels and the rate of change indicator has just started turning up.
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| Counter-view: If the market does break 4430 on decent volumes, it will have upside targets around the 4700/1550 range. A downtrend on the other hand, will find excellent support at 3950/1250 if it breaks 4100/1285.
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| A trader should be braced for either of these possibilities rather than simply extended range-trading. A rise is more on the cards because at the level of individual stocks and entire sectors, bullishness prevails.
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| Bulls and bears: Quite a few pivotal stocks made key upward breakouts on Friday. However, in most cases, the price rises aren't supported by volume expansion - volumes declined during the price rise.
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| Bajaj Auto, Bharti Tele, Grasim, ICICI Bank, Infosys, L&T, M&M, Nalco, NIIT, Telco and Wipro looked quite bullish on Friday if one ignores the low-volume signal. Cipla, Hughes Soft and Digital looked like potential movers. Other stocks that saw investor interest included Tata Teleservices, Moser, Mphasis, TVS, HCL infotech, Infotech Enterprises and Tata Elxsi.
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| The IT sector seems to be generally looking good, and the auto sector is seeing frantic buying. There is a little cautious interest in PSUs following Arun Shourie's new initiatives to continue the disinvestment process.
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| Banks such as SBI, OBC, Bank of Baroda, PNB, Union Bank, UTI Bank and Kotak all seem to be arousing interest again. There could be a little action in cement as well, but volumes have really dipped in shares of that sector.
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| MICRO TECHNICALS
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| KOTAK MAHINDRA BANK
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| Current price: 252.5
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Target Price: 270
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| The stock has started rising on high volumes. It has almost completed a bullish saucer formation that projects to a target in the 270-275 range. There is resistance around 255 and a close above that level would confirm the bullish trend.
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| There is also high daily volatility - any stop-loss above 245 is likely to be triggered unnecessarily.
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| Go long, and keep a stop at 244. The scrip may be worth holding for the long-term, so consider booking only partial profits if 270 is achieved.
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| BAJAJ AUTO
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| Current price: 799
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Target Price: Not applicable
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| The stock has moved to a 10-year high on very high volumes. It is impossible to make chart projections about ultimate targets. The move has been very rapid, so reliable support exists only around 750 levels. The risks in case of a downturn are fairly obvious.
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| However, it's probably worth taking a position for a couple of weeks and setting an initially wide stop-loss at 750. The move looks promising enough to bear the risk.
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| BHARTI TELEVENTURES
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| Current price: 75.6
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Target Price: 80
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| The target is a minimum expectation. The stock has actually performed a promising breakout from resistance around 68 levels. There was strong volume expansion with the breakout and other telecom sector stocks also went up in tandem.
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| Go long, keep a stop at 69 and average up by booking only partial profits at 80. Consider setting a trailing stop if you wish to hold for the long-term.
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| ICICI BANK
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| Current price: 204
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Target Price: Not applicable
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| The scrip has broken out of a range of high resistance on excellent volumes. It is impossible to make short-term predictions about the stock's targets because it doesn't have an obvious chart formation.
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| The long-term target, however, appears to be in the range of 250-plus and the momentum is good. Go long, keep a stop at 189. The wide stop is required because the stock has a fair daily range.
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| NALCO
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| Current price: 117.5
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Target Price: 125
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| The stock has bounced off a low at 98 with higher volumes. It is likely to hit resistance around 125, but there appears to be enough momentum to push it into that range.
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| There is a long-term target of about 135 but the resistance between 125 and 135 is pretty strong. Take a short-term trade with a stop at 110 and book at least partial profits at 125.
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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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