Traders will have to wait for a breakout outside 5,050-5,150 for short-term direction.
There was minimal movement in the stock market with prices stuck inside a very narrow range. The Nifty registered a rise of 0.95 per cent, closing at 5,137 points while the Sensex rose 1 per cent to 17,166 points. The Defty rose by 1.43 per cent as the rupee continued to strengthen.
Breadth was neutral or slightly negative. Volumes were low in both cash and derivatives segments. Smaller stocks under-performed. The Midcaps was down 1 per cent, the Nifty Junior was down 1.4 per cent and the BSE 500 was up a nominal 0.2 per cent. FIIs continued to be large net buyers while domestic institutions sold.
Outlook: The short-term trend is impossible to read and we will just have to wait for a breakout outside 5,050-5,150. Any such breakout is likely to be accompanied by volume expansion and likely to lead to a move of 100-150 points in the direction of break. The intermediate trend appears to be bullish and so is the long-term trend.
Rationale: The intermediate trend has now been up for five weeks since the market bottomed at 4,692 on February 5. Since it's in phase with the long-term trend, which is also up, it could continue to run North over the next 3-6 weeks. The next peak should clear 5,160. Thus net gains are slightly more likely. The danger signal for an intermediate trend reversal would be a drop below 4,850, so there is also room for a short-term downtrend.
The short-term trend is showing a classic consolidation pattern with very tight ranging and low volumes. Any breakout will probably come on higher volumes and the market could swing by 100-odd points in the very next session. So, if we see a close outside 5,050-5,150, expect a move till 4,950 or 5,250 at least.
Counter-view: Volumes have been abnormally low for a bull market with a favourable intermediate trend. Breadth also looks weak with smaller stocks underperforming pivotals. Both low volumes and narrowing of breadth are bearish signals. It is possible that this is the precursor to an intermediate reversal. In that case, as mentioned above, the key level to watch would be 4,850.
Bulls & Bears: Traders should stick to highly liquid counters because losses in small stocks as occurred last week are usually accompanied by absence of liquidity. The banking sector, NBFCs, housing finance companies and DFIs made some positive gains with the Bank Nifty up 1.5 per cent. The CNXIT also rose by 2 per cent though there was quite a lot of volatility within the sector. The auto sector saw profit-booking that could continue. Sugar stocks continued to slide
In other sectors trading was very choppy and stock specific. Metals were up one session and down the next – Sterlite closed strong while Hindalco looked weak but that could be reversed on Monday. Ditto for real estate where there was no clear sector pattern. In FMCGs, Hindustan Unilever took a hammering while Colgate looked strong and ITC recovered from the post-Budget sell off.
MICRO TECHNICALS
MARUTI SUZUKI
Current Price: Rs 1,463
Target Price: Rs 1,430
The stock has recovered off recent lows at Rs 1,315 and it is hitting resistance again. A slide till support at the Rs 1,430 level is a minimum expectation and it could fall till Rs 1,400. Keep a stop at Rs 1,470 and short. Book at least 50 per cent profits below Rs 1,435 and reset the stop to Rs 1,450.
LIC HOUSING
Current Price: Rs 810
Target Price: Rs 860
The stock has completed a falling wedge pattern and looks set for an upside breakout. It saw some volume expansion last week. The upside could be around Rs 860. Keep a stop at Rs 800, and go long. Add to the position above Rs 835 and reset the stop to Rs 820.
ORIENTAL BANK
Current Price: Rs 291.40
Target Price: Rs 280
The stock hit resistance above Rs 305 and has started a reaction. It is likely to slide till around the Rs 280 level. Keep a stop at Rs 297 and short. Increase the position below Rs 287. Book profits at Rs 280. If Rs 297 is broken, reverse the position and go long with a target of Rs 307.
COLGATE PALMOLIVE
Current Price: Rs 736.40
Target Price: Rs 775
The stock has a pattern that has already pushed it to recent highs. It has the potential to reach Rs 775, at least on intra-day basis, though projections in a new zone are always subject to greater error. Keep a stop at Rs 725 and go long. Above Rs 750, increase the position and reset the stop to Rs 745. Book profits above Rs 775.
TCS
Current Price: Rs 796.95
Target Price: Rs 840
The stock is testing resistance at around Rs 800. If it breaks out, it will be in a new zone with a tentative target of about Rs 840. Keep a stop at Rs 785 and go long. Above Rs 805, increase the position and reset the stop loss to Rs 800. Clear the position above Rs 835.
