Market could continue to gain

MACRO TECHNICALS

Short-term trend appears healthy, but not strong enough to pull the Nifty up past 3250

A surge after four lacklustre sessions helped the he Sensex close out the week at 10609 points with a 2% gain. The Nifty did even better, gaining 2.8 per cent to close at 3128.2 points. The Defty was up a whopping 3.16% as the rupee firmed against the dollar. Breadth signals were mixed.

On one hand, the advances: declines ratio was extremely positive. On the other, a broad index like the BSE 500 underperformed the narrower Nifty/ Sensex, rising only 1.18 per cent. And, trading volumes stayed low.

OUTLOOK: We had confirmation that this is an intermediate rally when the market registered higher peaks on Friday. The market could continue to gain until it hits resistance at somewhere between Nifty 3175-3250. In the next downtrend, it will find support at 3000.

RATIONALE: The downtrend that started on May 11 from a peak of Nifty 3774 bottomed out at 2595 on June 14. Since then, we've seen two intermediate peaks at 3083 (25/06) and 3128 (30/06) with a higher bottom at 2900 in-between the two peaks. We can't tell yet if this is the first rally in a new bear-market or a new rally in a continuing bull-market. The short-term trend appears healthy but not strong enough to pull the Nifty up past 3250.

As stated above, if there's a short-term downtrend, there should be support around 3000. If the market falls below 3000 in the next downtrend, it's very likely that it could continue to fall till 2800.

COUNTER-VIEW: The key support/ resistance levels are 3000/ 3250. If the Nifty crosses one or the other, it will clarify the long-term direction of the market. I do think we're in a new bear-market and this is what is called a "dead-cat bounce". But a rise past 3250 could bring new life to the gasping bulls.

BULLS & BEARS

The bullish sentiment was very widespread though large stocks responded better than smaller ones. Most stocks promise to deliver performances that approximately match the indices. A few could beat the market however. That short-list includes BHEL, Gujarat Ambuja, HDFC Bank, Hindustan Lever, M&M, Reliance Industries and Tata Motor.

Wipro and Zee also look interesting but there are huge bands of resistance within 3-4 per cent of the respective current prices. ABB and Dabur seemed to run into selling pressure on Friday and that could continue.

MICRO TECHNICALS

BHEL
Current Price: 1949.45
Target Price: 2100

There is a sharp volume expansion along with a rising priceline. The stock has a clear ruin till around the 1990 mark where it hits resistance. That resistance is likely to be overcome given the high volumes. The next move will to around 2100 before it hits the next barrier. Keep a stop at 1930 and go long.

Hindustan Lever
Current Price: 229
Target Price: 242 (Minimum), 255 (Maximum)

The stock has risen sharply on expanding volumes. It completed a breakout when it climbed above 225. The minimum target would be about 242 and it's possible that HLL could move till around the 255 mark. Keep a stop at 224 and go long.

Reliance Industries
Current Price: 1059.85
Target Price: 1165

RIL is interestingly poised just below a resistance at 1065. If it closes above that mark, it will complete a breakout. The minimum target would then be about 1165 (close to the all time high) and RIL may easily move to a new all-time high of 1250-plus. There are two caveats. 1) Volumes are relatively low "� that is, there hasn't been a volume expansion yet. 2) The nearest support is at 1020.

Tata Motors
Current Price: 794.85
Target Price:

The stock has climbed sharply on high volumes. It should rise till about 830-835 where it will hit powerful resistance. If it crosses that and closes above 835, it could move till the 880 level. Keep a stop at 770 and go long. Be prepared for exceptional volatility.

Wipro
Current Price: 513
Target Price: 535, 605 (long-term)

The stock has developed a breakout formation with decent volumes. Its projected maximum target would be in the range of 605. But there's a massive resistance at about 535 and that's likely to be the short-term limit. Keep a stop at 505 and go long. Book partial profits at 535 and hold a delivery position for 3 weeks.