Rangebound trading

MACRO TECHNICALS

The closing levels of markets may set new trends.

Friday proved to be a swing session. The market touched new highs before strong selling pressure pared down the gains. The Sensex ended the week at 10860.04 points after hitting an upside of 10951 in mid-session.

That left the BSE benchmark 0.88 per cent ahead on the week. The Nifty was ahead by 1.58 per cent w-o-w and closed at 3234 after hitting a high of 3258. The Defty was ahead by 1.72 per cent.

Breadth indicators were quite poor by the weekend with declining shares comfortably outnumbering advances. Trading volumes were reasonable throughout the week with the Friday sell-off also coming on high volumes. The BSE 500 was ahead by only 0.62 per cent.

Outlook: Next week may see a further burst of profit-taking with the market likely to oscillate between Nifty 3190 and 3250 (Sensex 10750 and 10950). Closes above the Nifty 3255 (Sensex 10950) level or below 3180 (10750) would be significant in terms of setting a new trend.

Rationale: The market has achieved its short-term upside target by crossing 3250. Given the volumes generated on Friday, the resistance at this level is quite severe. However, the support at 3190 also seems quite strong. So, an oscillation between 3180 and 3250 is the likeliest pattern with a fair amount of intra-day volatility thrown in.

Counter-view: By the weekend, breadth signals were quite negative. The market has pretty much been on an uptrend since November 2005. This weakness could just signal an impending change in the intermediate trend.

The first signal of such a trend reversal would be a close below 3180 and we would receive a confirmation if the next support at 3120 (10,400) is subsequently broken establishing a lower bottoms pattern.

Bulls & bears: Most of the market went into a reaction mode. The only sector, which showed signs of strong buying support, was energy. Stocks like GAIL, IPCL and ONGC continued to move up.

Apart from these, buying was scattered and stock-specific, while the selling was generic. Stocks such as Aventis, BoB, Concor, Grasim, i-flex, KMB, MphasiS, BFL, PNB, RIL, Sun Pharma, Tata Motors, VSNL and Zee Telefilms remained interesting from the bulls' perspective.

MICRO TECHNICALS

CONCOR
Current Price: 1396.9
Target Price: 1465

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The stock saw massive volume expansion on the back of institutional buying. It is hitting resistance between 1400 and 1410. If that resistance is overcome, the next target would be 1465. There is little downside risk. Keep a stop at 1385 and accumulate with a 5-10 session perspective.

GAIL
Current Price: 279
Target Price:

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The stock is testing a strong resistance at 280. It has generated consistently high volumes and the trend may be reversing from flat to bullish. If it closes above 280, GAIL is likely to move till around the 295 mark very quickly. Keep a stop at 270 and accumulate.

I-FLEX
Current Price: 1225.65
Target Price:: 1260

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The stock seems to have completed a breakout by closing above 1225. It has a likely target of 1260. Keep a stop at 1210 and go long. Book only partial profits at 1260 "� there is a chance that the stock could rise till around the 1300 mark.

ONGC
Current Price: 1221
Target Price: 1255

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The stock has good support at 1200 and a likely upside till 1255, where it will hit resistance. If it does close above 1250, it will have a subsequent target of 1300. Keep a stop at 1200 and go long. Book partial profits above 1250.

VSNL
Current Price: 419
Target Price: 430

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The stock has made a strong breakout with a big volume expansion. It has a minimum target of 435 and a probable target of 450-plus. Friday's trading came with a gap between 409-410 that might be filled in the next three sessions. Keep a stop at 408 and go long.

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