Minor support at 3960

MACRO TECHNICALS

While long-term momentum indicators were neutral, short-term indicators have moved up from "sell" zones.

The market continued to move upwards, negotiating settlement without problems. The Sensex closed up 1.03 per cent, closing at 13844 points.

The Nifty was up by 1.18 per cent at 3997.6 points (it crossed 4000 on Friday). The Defty was up by 1.34 per cent as the rupee continued to firm up against the dollar.

Breadth signals were reasonable. Volumes were a trifle low for settlement week but advances outnumbered declines. Long-term momentum indicators were neutral, short-term indicators moved up from "sell" zones.

The FII stayed strongly positive through the last week and whole of November. The "mutuals" were marginally negative in November, and net sellers through last week and buyers on Thursday.

Outlook: The question now is when, not if, there will be a major correction. It could happen next week, it could take another couple of weeks. But the market could also rise an indeterminate amount until such time as the correction occurs. Minor corrections will find support at 3960 on the Nifty.

Rationale: The market has risen for 17 consecutive weeks, which is way past normal limits. It has shown low or negative momentum signals and average volumes, which are both danger signals when the indices are trading at successive record highs.

But the price-line keeps rising. Usually, a major correction is immediately preceded by high intra-day volatility and strongly negative advance-decline ratios. We haven't seen either signal yet.

Counter-view: There have been a few instances globally of bull markets that have lasted a very long time. For example, Japan in the 1980s and the US in the 1990s are both bull runs that occurred within living memory.

In such markets, intermediate uptrends also run for very periods. The Indian market has delivered consistent gains since 2003. If it's a similar example of a secular, long-term bull market, the intermediate trend could continue to run up indefinitely.

Bulls & bears: Several pharma shares staged a smart recovery towards the end of the week "� Aurobindo Pharma, Dr Reddy's, Ranbaxy, Lupin, Nicholas and Biocon (if one can include it in this list) all did well in the new settlement. Bajaj Auto and Hero Honda saw heavy short-covering, which may have sparked a technical recovery.

Apart from these, the investment was scattered across sectors and the list of bullish stocks included BoI, HLL, I-Flex, ITC, Jaiprakash Assoc., Maruti, PNB, Punjab Tractor, Raymonds, Reliance Communications, Satyam, Sterlite, SBI, Siemens, Tata Power and Zee Tele. BPCL, HPCL dropped and oddly enough, cement stocks looked ready for a correction.

MICRO TECHNICALS

Biocon
Current price: 378
Target price: 387, 425

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The stock is interestingly poised below a strong resistance at 387. If that resistance is broken and Biocon closes above 388, it is likely to make a target of 425. Volumes haven't expanded yet. Keep a stop at 370 and go long. Book partial profits at 387. Take a fresh long position if the stock closes above 388-390.

Hero Honda
Current Price: 771
Target Price: 805

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The stock has completed an impressive recovery from 680 and it seems to have completed a low volume inverted Head & Shoulder. The target would be about 810 but it's likely to be underperformed due to low volumes. Expect resistance between 785-795 that will be crossed over a couple of sessions. The second resistance at 805 will probably not be crossed.

I-Flex
Current Price: 1678
Target Price: 1720

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The stock made an important-looking breakout when it crossed 1660 on volume expansion. It has a target in excess of 1720 though it's difficult to project targets with a stock at record highs. Keep a stop at 1665 and go long. Book profits above 1710.

Jaiprakash Associates
Current Price: 687
Target Price: 720

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The stock seems to have cleared resistance at the top of a trading range by closing above 677 on high volumes. The target computes to roughly 720. Keep a stop at 665 and go long. Book partial profits above 705.

SBI
Current Price: 1362
Target Price: NA

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The stock is in a huge bull run with an uptrend running at a (daily) slope of almost 45 degrees. The pattern is such that its impossible to compute targets except through a linear regression, which assumes that the trend will continue at exactly the same slope and momentum. Keep a stop-loss at 1325 and raise the stop by 10 points for every 20 point advance.

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