Sensex close to critical resistances

MACRO TECHNICALS

The major indices are maintaining higher top and higher bottom formations, which means the long-term trend remains bullish.

The Sebi ban hit an already bearish market hard before a small recovery started on Friday and strengthened promisingly in the special BSE session on Saturday.

The Sensex hit a low of 11344 points before bouncing back to close at 12043 on Saturday for a nominal week-on-week gain of 0.1 per cent.

The Nifty dropped to corresponding lows of 3342 points before recovering to 3557.6 points for a small WoW loss of 0.43 per cent.

Breadth signals were difficult to read. Settlement day was marked by the usual enormous volumes. On other sessions, volumes were decent enough. The advance-decline ratio was negative until late on Friday and it was solidly positive albeit on low volumes, on Saturday.

Outlook: Next week is likely to see more volatility. The Sensex/Nifty are intriguing poised close to critical resistances. The Nifty failed to clear a resistance at 3570 while the Sensex appears to have crossed the equivalent resistance at 12030.

Another close at or above these levels, would move the market into another intermediate uptrend. A drop would lead to further range-trading between Nifty 3450-3570 (Sensex 11650-12025).

The major indices are maintaining higher top and higher bottom formations, which means the long-term trend remains bullish.

Rationale: There is support at Sensex 11650-11700, (Nifty 3450-3475) but that support has been pierced twice on intra-day moves.

On the upside, the resistance at 3570 (12025) has also been penetrated intra-day. Saturday's session was low volume and not conclusive. But another close beyond the top end of the range would start a strong uptrend.

Counter-view: There are two key triggers affecting the overall market trend. One is the Sebi ban "� the ramifications are not yet clear. The other is the attitude of FIIs, who turned buyers on Friday after being consistent sellers since early April.

The FII buying on Friday could have been tactical. If the ban impact is more severe and the FIIs have not genuinely switched attitude to buying, the market may fall again. The worst case scenario appears to be another burst of profit-taking which pushes the market back to test support at 3450-3475.

Bulls & bears: Most stocks are poised to follow the general market trend. Most fell through the week and made recoveries from lower levels on Friday-Saturday. A few could move up regardless of prevailing sentiment.

These include Ashok Leyland, Biocon, Cadila Healthcare, Dabur, Hindustan Lever, Hindalco, Reliance Industries, NTPC, Sterlite, TCS and Zee.

MICRO TECHNICALS

Dabur
Current Price: 159
Target Price: NA

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The stock moved through a massive range on Friday, opening around 128 and rising to close at 155-plus. It has seen a big volume expansion in the past two sessions. It's impossible to project targets with this sort of runaway move to new highs. Keep a trailing stop at 155 and go long. Move the stop up by 10 rupees for every 15 moved.

Gail
Current Price: 289.15
Target Price: 281, 275

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The stock has taken a steep dive from 325 levels. It doesn't seem to have bottomed out yet. There's some support at 281 and below that at 275. Keep a stop at 296 and go short. Cover partially at 281. Cover the whole position at 275.

Reliance Industries
Current Price: 1022.95
Target Price: 1050. 1080

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The stock stayed firm through Friday and Saturday. It has a minimum target of about 1050 and it may move further if it can break resistance at 1050 levels. Keep a stop at 1010 and go long. Book partial profits above 1050.

Sterlite
Current Price: 2855.15
Target Price: NA

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The stock has made a huge breakout accompanied by volume expansion. It's impossible to project a target since it's in a new zone. Keep a trailing stop at 2810 and go long. Move the stop up 15 rupees for every 25 rupee move.

TCS
Current Price: 1979.35
Target Price: 2035 (short-term), 2150 (long-term)

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The stock has made a healthy-looking pullback backed on high volumes. It has a strong resistance between 1980-2035. Worth accumulating at current prices because it should penetrate that resistance and reach a projected target of 2150 within the next 4 weeks. In day-trader terms, TCS is likely to test 2035 on an intra-day basis.

So it can be bought at current levels and sold above 2025.

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