The resistance between 2,750-2,850 is unlikely to be broken.
The market continued moving south for four sessions after making a downwards breakout. Then, after hitting lows at around 2,550, the Nifty made a small recovery to close at 2,620, for a week-on-week loss of 5.19 per cent. The Sensex lost 6.4 per cent and closed at 8,325. The Defty was down 6.7 per cent with the rupee hitting record lows.
The Junior was down 7.3 per cent and the BSE 500 was down 6.7 per cent as the bulk of the market lost more ground than the top pivotals. Poor breadth signals were backed with expanding volumes on the downtrend. Both FIIs and domestic institutions continued to be massive sellers.
<B>Outlook:</B> The market is now in a short-term uptrend. It will probably test resistance on the upside between 2,750-2,850 before it tests supports in the 2,500-2,550 region again. The intermediate trend remains clearly negative and there is a good chance that the 2,500 support will be broken. In that case, 2,250 (the October 2008 lows) is the next target.
<B>Rationale:</B> Friday saw some apparent consolidation and short-covering. This should translate into a short-term uptrend. However, the resistance between 2,750-2,850 are unlikely to be broken. On the downside, the initial target of the breakout has been achieved at 2,550. But supports at that level are likely to be tested again in 2-3 weeks.
<B>Counter-view:</B> It would require an extraordinary external shock to pull the major market trend around. Sadly, the next major trigger is liable to be political uncertainty caused by impending elections and that is most likely to have a bearish impact. The best-case scenario appears to be range-trading between 2,550-2,850. A close above 2,850 would be cause for optimism.
<B>Bulls & bears:</B> Next week presents a ticklish problem for traders because we may see a very short-term rally inside a bigger down move. Stops would have to be tight and waiting for the right entry levels would be crucial. There are no general rules for handling such situations.
IT is one industry that has seen bullish action due to the falling rupee. Auto stocks have also seen some positive pull backs with investors coming in at very low values. But there was selling in the auto sector on Friday. FMCG scrips could see some support early next week.
But any significant upwards technical correction would have to include the banks. The Bank Nifty lost over 11 per cent last week and any pullback without the sector's participation is inconceivable.
Some key bank stocks such as SBI, PNB, Kotak and ICICI appear to have bottomed and these would lead any rally that occurs. HDFC would also contribute to the upside but Reliance Capital looks to be heading for lower levels.
<B><font color="#990000">MICRO TECHNICALS</font></B>
<B>ADITYA BIRLA NUVO</B><BR>
<B>Current Price:</B> Rs 356<BR>
<B>Target Price:</B> Rs 335
The stock has seen a downtrend on expanding volumes. It's difficult to compute a target as it is in a new zone with no history. But, the minimum target should be Rs 335 and the strong downtrend makes it quite likely that it will drop further. Keep a stop at Rs 365 and go short.
<B>BHARTI AIRTEL</B><BR>
<B>Current Price:</B> Rs 602<BR>
<B>Target Price:</B> Rs 630
The stock has found some support at Rs 590 and it could make a sharp but temporary recovery during the next rally. Keep a stop at Rs 590 and go long. The target would be somewhere between Rs 630-Rs 635. Start booking profits above Rs 625.
<B>MPHASIS</B><BR>
<B>Current Price:</B> Rs 183<BR>
<B>Target Price:</B> NA
The stock has seen massive volume expansion despite the inimical market conditions. It is impossible to compute a target with this formation. Keep a trailing stop loss at Rs 172 and go long. Move it 5 points up for every 10 point gain.
<B>EDUCOMP</B><BR>
<B>Current Price:</B> Rs 1,555<BR>
<B>Target Price:</B> Rs 1,450
The stock has been consolidating with low volumes along support at Rs 1,525- Rs 1,575. However, it appears to still possess a downside bias. The minimum target on a breakout should be about Rs 1,450, at least in terms of an intra-day low. Keep a stop at Rs 1,575 and go short.
<B>PUNJAB NATIONAL BANK</B><BR>
<B>Current Price:</B> Rs 311<BR>
<B>Target Price:</B> Rs 335
The stock appears to have taken support between Rs 285-Rs 290. It could bounce till somewhere between Rs 325-Rs 335. The latter target appears achievable on an intra-day basis at least. Keep a stop at Rs 300 and go long. Book partial profits at Rs 325 and cash out at Rs 335.
