Markets to oscillate between 5500-5950

MACRO TECHNICALS

If the 5650 support breaks, the market could slide to 5525 before hitting the next serious support.

This week, the FIIs and Mutual funds were net buyers to a significant extent. However breadth signals were not very good. Volumes were low through the week and by the weekend, the advances to declines ratio wasn't that healthy.

The BSE 500 was ahead 4.88 per cent however. The underperformances came in the IT sector (the CNX IT was down 0.9 per cent) and in smaller scrips.

Outlook: There's apparent resistance close to the all-time highs above 5950, in fact. There's strong support all the way down to the 5500 level. There's a fair chance that the market will oscillate between this range next week.

Rationale: While the market rebounded off support at 5525 early this week, it is not generating enough volume to make new highs.

There are support levels closer to the current price but the Nifty is also swinging through 200 points per session. It's safer to assume that it will hit the 5500 support.

Counter-view: The FIIs and mutual funds appear to have both turned positive. Usually that's sufficient to force the market up. If the change in attitude is backed by more volumes, it would almost certainly mean new highs.

Bulls & bears: Refinery stocks saw a big surge through the week. Essar Oil and HPCL seemed to be especially favoured.

Among other scrips, bulls will have to be very selective. While several stocks have excellent price patterns, in most cases the volume is low, which makes the chart projections suspect. Investment through the week was broad-based but on Friday, very few scrips maintained bullish perspective.

Banking scrips did well until the last session. Even then, a couple of counters such as Corporation Bank and ICICI could hold to the value, There could be a bounce in the IT scrips next week since several including Infosys have seen sharp selloffs.

Otherwise there were scattered winners such as Dr Reddys, ITC, Grasim, Suzlon Energy, Nagarjuna Fertiliser. While the Reliance and ADA group counters continued to register powerful volumes, only Reliance Capital looks ripe for a sustained gain.

MICRO TECHNICALS

Essar Oil
Current Price: 192.8
Target Price: NA

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The stock has zoomed on a volume expansion. It's impossible to set a target on this kind of vertical move. Two fears arise - there is no reliable support because the stock is in a completely new zone.

Also the bulk of the rise may be over. If you want to go long, keep a trailing stop at 180. Move the stop up 10 units for every 15 unit rise.

Grasim
Current Price: 3837
Target Price: 4200

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The stock is apparently poised on the verge of a breakout. A close above 3875 will confirm this. The target would be about 4200. However volumes have been just average so the breakout could take a while. Keep a stop at 3775 and go long.

ITC
Current Price: 205
Target Price: 220

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The stock has jumped on a volume expansion. It completed a breakout on Friday by closing above 195. The target would be a minimum 220 and maybe more. Keep a stop at 194 and go long.

Reliance Capital
Current Price: 2289
Target Price: 2500

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The stock made a breakout when it closed above 2175. The projected target would be about 2500. However it has been a very low volume move. Keep a stop at 2225 and go long. Book partial profits above 2400.

Suzlon Energy
Current Price: 2064
Target Price: 2300

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Suzlon has seen some volume expansion along with a climbing price line. It could have a target of about 2300. Keep a stop at 2015 and go long. Book partial profits above 2250. Maybe worth keeping a delivery position for up to 6 weeks.

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