Short-term correction ended on Friday

MACRO TECHNICALS

Nifty to trade in the range of 6,100-6,300 this week.

A rare triple-top formation at close to an all time high was followed by a sell off on Thursday. The Nifty hit a record 6,350 points intraday and bottomed at 6,112 before closing at 6,200 for a week-on-week loss of 1.18 per cent. The narrower Sensex was down to 20,505 points before recovering to close at 20,827 and it actually gained 0.7 per cent. The Defty was down 1.08 per cent.

Breadth was quite poor with broader indices losing proportionately more. The Junior was down 4.6 per cent, the Midcaps lost 6.88 per cent while the BSE 500 was off 2.56 per cent. Volumes were low "� anecdotal evidence suggested the FIIs bought late on Friday and they were net buyers through the first four sessions. The domestic funds were sellers.

Outlook: The market has hit a good support and bounced. It could range trade and consolidate between 6,100 and 6,300 this week. If it closes below 6,100 however, it is likely to fall till at least 5,950.

Rationale: A triple-top is bearish and indicates strong resistance. It's already triggered a correction that has come back to an excellent support. Volumes have dropped. This is all typical range-trading behaviour with clearly defined support and resistance and it looks like a short-term correction inside an intermediate uptrend.

Counter-view: The intermediate uptrend has been in force since November 22 when the Nifty hit a low of 5,394. After seven weeks, it could be close to maturity and if the market does break the 6,100 support, it would establish a pattern of lower lows and start an intermediate downtrend. The target for that would be around 5,900-5,950.

Bulls & Bears: Results season has kicked off and movements are likely to be stock-specific. However there are a few clear sector trends. Cement stocks, PSU refiners (and RPL), auto shares and information technology (IT) look to be heading down and sugar stocks took a massive hammering that ended a promising bull run. Steel shares also saw sell offs.

Banks were selectively bullish as a group and the BankNifty gained 3.2 per cent with Axis Bank, ICICI and HDFC looking quite strong although the PSU banks did less well. Among IT stocks, Infosys, Polaris, Wipro and CMC, all looked bearish but HCL Infosystems, Educomp and maybe, TCS could buck this trend.

Otherwise movements were almost random with Aban Offshore, Aditya Birla Nuvo, Century, DLF, GAIL, Idea, IVRCL, PFC, RIL and Sun Pharma all attracting some bulls.

MICRO TECHNICALS

AXIS BANK
Current Price: Rs 1,170
Target Price: NA

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The stock has spurted to new highs on a volume expansion. It has already exceeded previous target projections due to strong moment. It isn't possible to make reliable price-target projections on the current charts. Keep a trailing stop at 1,150 and go long. Move the stop up 20 units for every 20 unit move.

IDEA CELLULAR
Current Price: Rs 139.9
Target Price: Rs 150

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The stock has developed a promising formation testing a key resistance at Rs 140 with a gradual volume build up. If it closes above Rs 140, there is a target of Rs 155. Keep a stop at Rs 137 and go long. Book partial profits at Rs 150.

RELIANCE INDUSTRIES
Current Price: Rs 3,128
Target Price: Rs 3,300

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The stock defied the market trend and jumped to a new high on volume expansion. It has a potential target of Rs 3,300 but the first reliable support is way below at Rs 3,080. Either take delivery with a stop at Rs 3,080 and a 10-session perspective or go long, with a stop at Rs 3,110.

TATA CONSULTANCY SERVICES
Current Price: Rs 989.8
Target Price: Rs 1,030

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The results are due on January 16 and the stock plunged to Rs 920 with a pullback to the Rs 990 levels. Expect more volatility and a net positive movement that will hit Rs 1,030 with unpredictable moves on Wednesday. Go long with a stop at 970, book profits above Rs 1,020. Exit by Wednesday with a "buy on rumour, sell on news" strategy.

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