If there is a breakout in settlement week, the move would be 200 points, till either 4,150 or 4,800.
The market registered net gains while moving inside a relatively narrow range. The Nifty was up 2.2 per cent, closing at 4,580.05 points while the Sensex gained 1.66 per cent at 1,541 points. The Junior was ahead by 2.6 per cent while the Defty gained only 1.24 per cent due to rupee weakness.
Last week saw small net losses arising from a series of volatile sessions, which alternated in direction. The Nifty lost 1.1 per cent, closing at 4528.8 points while the Sensex lost 1.1 per cent, closing at 15,240 points. The Defty lost a larger 1.7 per cent as the rupee slid below 48.7.
Trading volumes dropped slightly in the cash segment and declines outnumbered advances. However, breadth in the sense of traded stocks remained good. Derivatives volumes were high, leading into settlement week. FIIs remained net sellers while domestic institutions remained net buyers. The Midcaps and Junior Nifty lost more ground than the Nifty and Sensex heavyweights.
Outlook: The market stayed locked inside a range of 4,350-4,625 and it's difficult to call a breakout direction. Most likely, the market will stay locked in range-trading. However, if there is a breakout in settlement week, the move would be 200 points (till either 4,150 or 4,800). The Nifty is averaging high-low ranges of 125 points per session so this could occur in two successive trending sessions. The long-term trend is up but the intermediate and short-term trends are hard to read.
Rationale: Settlement considerations would accentuate any breakout since most traders would then try to play catch up. A drop below 4,350 would set up a pattern of lower lows, suggesting an intermediate downtrend, while a rise above 4,730 would confirm a bullish intermediate trend by establishing higher highs.
Counterview: Friday's gains had the feel of being driven by short-covering and a lot of calls were extinguished. That suggests market expectations are not bullish. Coupled to lower volumes, it's most likely that the week will start with a short-term downtrend as the market slides towards support at 4,350.
Bulls & Bears: Movements across sectors and stock classes were by and large, as range-bound as moves across the major indices. IT outperformed and so did banking though both sectors lost a little value. In IT, Satyam and 3iInfotech are both generating unusual volumes but they are likely to move in different directions with Satyam looking bearish.
In banking, several stocks including majors like ICICI and PNB are poised at key congestion zones – any upside breakout could generate strong momentum. Sugar continued to see high speculative volumes but the trend is not so clear. Real estate saw Purvankara as the stand-out performer and IBREL was also highly traded and bullish. There's an unusual focus on tea shares with Harrison, Assam Co, Jayshree and Mcleod Russell all generating high volumes.
MICRO TECHNICALS
RNRL
Current Price: Rs 81
Target Price: Rs 95
The stock has a wedge formation with two converging trendlines joining falling tops and rising bottoms. This is bullish if there's a breakout above the trendline joining the tops, accompanied by rising volume. In this case, it would mean a closing price around Rs 83 would set up a target of about Rs 95. Keep a stop at Rs 78 and go long.
IndiaBulls Real Estate
Current Price: Rs Rs 256.15
Target Price: Rs 267
The stock picked up volumes as it went up. It will test resistance near the 2009 highs of Rs 265- Rs 267. If there is a breakout beyond Rs 267, the stock could move till the Rs 280- Rs 285 level. Keep a stop at Rs 250 and go long with an initial target of Rs 267. Book partial profits at Rs 267 and reset the stop loss to Rs 260.
Satyam Computer
Current Price: Rs 98.6
Target Price: Rs 91
The stock has shown a falling trend since it peaked at around Rs 115 in early August. A pullback till support at around Rs 90-91 seems likely. Keep a stop at Rs 102 and go short. There is some support at Rs 94 so you could book partial profits at that level.
Yes Bank
Current Price: Rs 173.2
Target Price: NA
The stock has made a breakout on high volumes and is at a 52-week high. It's difficult to compute a target for that reason. Keep a trailing stop at Rs 167 and go long. Move the stop up by 5 points for every 5-point move.
Mcleod Russell
Current Price: Rs 174.35
Target Price: Rs 185
The stock has made a breakout to a new 52-week high on strong volume expansion. The target projection would be around Rs 185 and it could move further. Keep an initial stop at Rs 167 and go long. Book partial profits at Rs 185 and move the stop up till Rs 180.
(The target price and projected movements given above are in terms of the next five trading sessions unless otherwise stated.)
