Support to Nifty at 3350

MACRO TECHNICALS

The market is expected to witness correction for few trading sessions. It could eventually land up at its support level.

The market surged for three sessions and then, there was a big sell-off on Friday. Nevertheless, the indices registered gains for the week. The Sensex closed at 11589.44 points, up 2.74 per cent after hitting a high of 11930.

The Nifty was ahead by 1.53 per cent, closing at 3455 after hitting a high of 3555. The Defty was up 1.38 per cent as the rupee lost ground against the dollar.

Breadth signals were poor despite the outperformance of the BSE 500, which ended the week up by 2.88 per cent. Volumes were low except on Friday when there was a panic induced by flase rumours. Declines far outnumbered advances on Friday.

Outlook: The correction may continue for a couple of sessions. There is reliable support only at around the Nifty 3350 (Sensex 11350) levels. The next week could see the market land in that region.

Rationale: Friday's trading had an engulfing pattern of a huge daily range coupled to massive volume expansion. That's likely to translate into further falls. Given the speed of the previous rise, there isn't much support close to the current levels.

Counter-view: The long-term trend is very strong. Every single losing session since early February has been promptly followed by another burst of buying.

It is possible that traders will see Friday's drop as a buying opportunity and go long on Monday itself. The fact that the selling was sparked off by false rumours makes this more likely. But the short-term bearish signals do appear strong.

Bulls & bears: Despite the wave of selling, several stocks held their ground on Friday. Most interestingly, cement scrips such as ACC, Grasim and Gujarat Ambuja gained as a group in a falling market.

Other stocks that looked strong included Apollo Tyres, Ashok Leyland, BHEL, IDBI, LIC Housing, Lupin Labs, Sterlite and Jet Airways. Ranbaxy is also a potential buy, given it held its ground on Friday.

Some stocks dropped to levels where reliable support could be expected. Satyam and TCS were in this list and Tata Steel also seems to have found primary support levels. Infosys is a puzzling case "� on Friday, as it opened high with a big gap and stayed above its previous levels despite lots of selling.

The entire banking sector looks weak with the possible exception of HDFC Bank. Except for the counters mentioned above, most of the majors in the F&O segment look bearish and like the Nifty/ Sensex, there is room for a further fall before reliable support levels are hit.

MICRO TECHNICALS

Satyam Computers
Current Price: 816
Target price: 845

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The stock has seen a big sell-off and hit what seems like reliable support. Given the volumes generated, we may have seen a selling climax. If that's so, there will be a bounce till 845-850 levels. Keep a stop at 805 and go long. Sell above 845.

Gujarat Ambuja Cement
Current Price: 108.25
Target price: 120

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The stock rose with an accompanying volume expansion this week. It has a potential medium-term target of 118-120 achievable over 10 sessions. There is good support at 107. Keep a stop at 106 and go long.

HPCL
Current Price: 326
Target price: 305

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The stock saw a big sell-off in the past two sessions, dropping from 360 levels on high volumes. It could dip till 305 before reliable support is available. Keep a stop at 335 and go short. Cover below 310.

Infosys
Current Price: 3167
Target price: 3125 (downside), 3300 (upside)

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The stock had a very strange pattern on Friday, moving between 3155 and 3450 closing towards the lower end. It is very close to reliable support at 3125.

In the short term, it has a minimum upside of 3275. We are likely to see very high volatility with Infy ranging between 3125 and 3300 in the next couple of sessions. Buy below 3175 with a stop at 3125 and sell above 3250 with a stop at 3300.

LIC Housing
Current Price: 213
Target price: 230

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The stock has seen strong buying in the past four sessions. By closing above 210, it completed a bullish formation. The projected minimum target would be about 230. Keep a stop at 205 and go long.

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