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| Thanks mainly to the coincidence of Infosys delivering improved results and Maruti being listed, the market surged during the week despite a nervous undertone.
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| The Sensex hit a high of 3714.8 before settling at 3676.26, up 1.49 per cent. The Nifty did better; it was ahead by 2.04 per cent, closing at 1161.65 points after peaking at 1170.75.
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| The Defty closed at 871.05 for a gain of 2.48 per cent driven by the rupee's strength.
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| Breadth was quite weak and the market looked overbought. The Nifty put-call ratio was down to 0.27, which is well into the overbought zone. By the weekend, advances were outnumbered by declines. Volumes rose during the last two sessions when there was quite a bit of selling.
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| Outlook: While the trend remains bullish, the market is now into a zone with significant selling pressure.
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| There have been negative momentum divergences for the last three weeks and projected targets for this move have also been nearly achieved.
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| This is probably the second-last peak of the intermediate uptrend. And, it may be the last.
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| Expect choppy trading through the range of 3600-3750/1125-1180 next week. There is support just below the current level at Sensex 3660/Nifty 1150.
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| If that is broken, the next support is at Sensex 3590/Nifty 1125. Either or both could be tested next week.
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| Rationale: The uptrend has been in force for almost 10 weeks - that's close to maturity even for the first wave of a new bull market.
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| Momentum indicators such as the RSI and ROC have been weak and bearish for several weeks and the put-call ratio is also overbought.
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| Our target projections were in the range of 3750/1200 and those could still be achieved, perhaps inside a single session. But a full-scale reaction lasting several weeks could also start anytime.
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| Counter-view: The old market saw about "never bucking the trend" still applies. The market has continued to register higher tops. Another positive trigger of some description next week could push it past our projected peak at 2750/1200.
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| At any rate, it would be foolhardy to go short until there is some confirmation of a trend reversal. We could tentatively set 3590/1125 as our reversal level. If the market dips below that level, it will have registered lower bottoms - the first sign of a trend reversal.
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| Bulls & bears: Trading was extremely stock-specific. The eagerly awaited quarterly results will be key to trading patterns over the next few weeks.
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| Stocks that showed positive trends included Apollo Hospitals, Bharat Forge, Cipla, Colgate, Digital, EMerck, HDFC Bank, Hughes Soft, IDBI, IPCL, J&K Bank, Infosys, Mastek, OBC, Tata Power, Telco, Tisco, VSNL and Zee Tele.
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| And Maruti of course, but it is far too early to make reliable technical calls on MUL. Two Ice majors that showed extremely high volatility were CMC and i-flex.
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| MICRO TECHNICALS
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CMC
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Current Price: 476
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| Target Price: 525
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| The stock has shown a massive volume expansion and huge intra-day volatility in the last couple of sessions. It is likely to hit 525 on an intra-day basis with a probable range between 460-525.
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| In fact, this pattern is impossible to call on any long-term basis until either the bulls or the bears win the intra-day battle. Try and buy towards the lower end of the 460-525 range and book profits at the high end.
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COLGATE
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Current Price: 143.5
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| Target Price: 155
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| The stock looks as though it has almost completed a promising high-volume breakout. If it closes above 145, it is likely to move till the 155 level at least, with a potential target of 160-165.
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| Keep a stop at 135, and be prepared to hold for 3 weeks at least if the stock lifts above 145.
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HUGHES SOFT
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Current Price: 252.5
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| Target Price: 260
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| The stock made a breakout from the 235 level last week and the move came on good volumes. It will run into resistance above the 260 level.
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| However, if it crosses 260 and closes above that level a couple of times, it could move until the 295 mark. Worth averaging up; book partial profits around the 260 level and be prepared to hold the rest of the position for the long-term. Keep a stop at 239.
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IDBI
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Current Price: 42.6
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| Target Price: 46
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| The stock has confirmed a change in the long-term trend and gone bullish over the last two-three months. It made another upmove last move on fairly high volumes, moving to a 40-month high.
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| It will run into resistance at about 46-47, with a small possibility of moving up until the 50 level. Go long and keep a stop at 39.
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TATA POWER
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Current Price: 148.25
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| Target Price: 165
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| The stock has completed a reaction from around 165 and seen a turnaround from support at about 145. It should quickly proceed to move back up towards the 165 level, since the long-term trend seems to remain positive.
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| In the long-term, it should exceed the 165 mark since by definition we expect higher tops. But it may take a period of more than 2-3 months before that happens. Go long, keep at stop at 143 and book profits above 160.
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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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