Market may need a trigger

MACRO TECHNICALS

There has been a massive amount of trading within 4025-4200 in the past and it will require a big volume expansion to push the market up decisively.

Despite the loss of two days trading, the market generated reasonable volumes while remaining effectively rangebound. The Nifty gained 0.83 per cent to close at 4117.35 while the Sensex gained 0.18 per cent to close at 13934.27 points. The Defty continued its outperformance on the back of rupee strength to close up by 0.99 per cent.

Market breadth was somewhat negative. However this showed up mainly in small caps. Midcaps did reasonably and the BSE 500 rose by 1.2 per cent. The BankNifty was down 1.68 per cent while the CNX IT index outdid the rest of the market to close up 2.56 per cent.

The FIIs were net negative, the Indian funds were net positive and one infers that retail investors were net sellers or simply absent from the poor small cap performance.

Outlook: The market is rangebound between 4025-4200. It may need a trigger for a breakout in either direction. It could continue trading inside this range indefinitely. Obviously a breakout past 4200 will test the all time highs (4239) and be positive if the market closes at a new high.

Rationale: There has been a massive amount of past trading within this zone and it will require a big volume expansion to push the market up decisively. On the downside, there is support till about 3950.

Counter-view: By definition, a bull market achieves successive peaks. The very fact that this intermediate uptrend hasn't generated a new high in 6 weeks of existence is a negative signal.

Also last week, the market failed to test its previous intermediate high (4217 April 26), which is another mildly negative signal. An intermediate trend can mature and reverse in 6 weeks so we could be in for another period of lower lows.

Bulls & bears: The bullishness was skewed in favour of large mid-caps and pivotals. Most of the outperformance of the CNXIT was attributable to just about five stock including Subex, Rolta, Tech Mahindra, Moser, etc"� the majority of IT stocks registered losses.

In contrast, UTI Bank was the only significant gainer in the losing bank sector "� Bank of India, Corp Bank and ICICI were among the bigger losers.

Among other stocks,the Indiabulls "twins" continued to do well as did Bharat Forge and IFCI. Network 18 and Colgate both saw heavy buying on Friday. Gail was the most interesting gainer among the Nifty set and Cipla stabilised after its previous hammering.

MICRO TECHNICALS

Bharat Forge
Current Price: 339.7
Target Price: 370

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The stock is generating good volumes with a bullish price movement. It is likely to test resistance that exists immediately above the current price and commence range-trading between 340-370 in the next couple of weeks.

It should be possible to buy towards the bottom of this zone with a stop at 335 and sell above 360 with a stop at 370.

Gail
Current Price: 310.1
Target Price: 325

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The stock has completed a very promising formation on good volume expansion. It has a target of about 325 and it could move quite a bit further if it achieves this because it would have moved till a new high. Keep a stop at 295 and go long

IndiaBulls Fin Services
Current Price: 568.8
Target Price: 620

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The stock has broken out of range-trading with a strong volume expansion coupled to a big jump in price. It has a potential target of 620 This may well be achievable since this is the all-time high since the spin off hence, there isn't significant resistance. Keep a stop at 540 and go long.

Network 18
Current Price: 513.55
Target Price: 550

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The stock has made a big move on institutional buying in the past couple of sessions. It has a minimum target of 550 and it could move a lot further given enormous volume expansion. Keep a stop at 495 and take delivery. Book partial profits above 550 and average up.

Tech Mahindra
Current Price: 1648.9
Target Price: 1690

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The stock is testing strong resistance in the current price zone along with a promising volume expansion. If it closes above 1660, it is likely to move till a minimum of 1690 and more likely, till around 1735 before encountering serious resistance again. Keep a stop at 1625 and go long.

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