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| If the markets overcome resistance at Sensex 5135, there will be another upward spurt
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| The market went through a sharp recovery last week, with rising pricelines receiving an impetus from short-covering on settlement day.
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| The Sensex closed at 5044.82 points, registering a rise of 4.26 per cent. The Nifty rose 4.84 per cent closing the week at 1615.25 points.
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| The Defty rose 4.54 per cent as the rupee continued a trend of easing against the dollar. Breadth indicators were also bullish.
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| Adavances outnumbered declines by a healthy margin and volumes were reasonable in general and excellent on Thursday. The BSE 500 rose by 4.94 per cent.
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| Outlook: The market is poised at a very interesting point. It appears to have completed a three-week correction pattern and started to go bullish all over again.
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| The Indices are just below the 2003 peaks and if the market overcomes resistance at Nifty 1630/Sensex 5135, there will be another upwards spurt.
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| The opening session on Monday will be crucial. Assuming that these resistances are broken, the respective Sensex/Nifty targets would be around 5400/1750.
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| Rationale: The turnaround last week was backed by strong indicators. Oscillators like the RSI/ ROC and MACD all switched direction decisively and indicated a strong upmove.
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| The overall market was stronger than the narrow Sensex, which showed relative underperformance. A turnaround backed by strong volumes and strong indicators should lead to a new 2003 high, since the long-term trend remains very bullish.
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| Counter-view: The one danger signal was the Nifty put-call ratio, which hit the extremely overbought reading of 0.25.
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| The market has seen short-term selloffs everytime the PCR has hit these levels. It's possible that the resistances at the market peaks in early November will prove too strong to be broken immediately.
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| In that case, the indices will oscillate between Sensex 4750-5135/ Nifty 1550-1630 again.
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| Bulls and bears: The gainers this week included a motley bunch of tech and media stocks such as Crest, Hughes Software, i-flex, NIIT, Polaris, PSI Data, Saregama, Syngenta and Wipro.
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| Other major gainers included Bajaj, Bhel, BPL, Essel, Finolex Cables, HDFC, Hindalco, MTNL, M&M, P&G, Reliance Capital, Sterlite, Gail and Nalco. Among major pharma counters, Dr Reddy's and Cipla saw late surges on Friday.
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| Many index pivotals mirrored the behaviour of the indices; they hit lows and bounced with strong indicators and reasonable volumes to back the recovery.
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| However, they closed below the critical resistances on early November. This group included Reliance, Larsen and Infosys.
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| MICRO TECHNICALS
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| BAJAJ
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| Current price: 981
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Target price: 1020
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| The stock made a sharp breakout with higher volumes on Friday. It has climbed to a succession of all-time highs in the past few months.
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| So, there's no question of assessing possible resistances. The target on this breakout could be around the 1020-mark. There is support at around 955-960. Keep a stop just below that 955 level and go long.
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| CREST COMMUNICATIONS
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| Current price: 38.4
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Target price: 47
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| The stock shot up with a massive expansion in trading volumes over the last couple of sessions. When it crossed 36, it completed a bullish saucer formation, which has a possible price target of around 47.
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| However, the rise has been so rapid that there are few possible supports.
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| Keep a stop at around 32, because intra-day volatility could easily trigger anything that is higher, without any actual change in the bullish trend.
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| HUGHES SOFTWARE
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| Current price: 491
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Target price: 530
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| The stock has just climbed to a new high, But this rise has come on very low volumes, which is a danger signal.
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| However, the price pattern seen in isolation is very bullish. There is a possible target at around the 530 levels. The lack of volumes may lead to a formation failure.
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| But there is reliable support in between the band of 470-480. Keep a stop at 470 and go long, being prepared to book profits anywhere between 515-530.
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| I-FLEX SOLUTIONS
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| Current price: 804.45
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Target price: 810; 940
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| The stock has shot up with high volumes. There is severe resistance at around 810. However, if the stock closes above 810, it will have a target of around 940.
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| In normal circumstances, the trader could wait for that primary target of 810 to be achieved.
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| However, the price formation here is extremely volatile and, the stock is likely to close well above 810 if the key resistance is broken. Keep a stop at 775 and go long.
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| POLARIS SOFTWARE
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| Current price: 183.1
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Target price: 197
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| The stock has completed a bullish saucer formation with a breakout on higher volumes. The target projection is in the range of 197-200. There is reliable support at around 177.
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| Keep a stop at 175 and go long. Perhaps it's worth buying a put at 170 rather than keeping a conventional stop.
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| (The target price and projected movements given above are in terms of the next five trading sessions unless otherwise stated.) |
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