There is good support between 4,550-4,600 which held through last week.
A week of volatile trading led to consolidation above a key support at 4,550. However, there were net losses. The Nifty closed at 4,680.4 points for a week-on-week loss of 1.09 per cent while the Sensex was down 1.45 per cent at 15,689 points. The Defty was down 1.26 per cent due to a weaker rupee.
The Junior lost about 0.6 per cent and the Midcaps 0.4 per cent, while the broad BSE 500 was down 0.8 per cent. Clearly, larger stocks under-performed their smaller counterparts. This may have been due to heavy FII selling in pivotals, which wasn't fully counter-balanced by domestic institutional buying. Volumes were good but advance-declines ratios were negative.
Outlook: The market trend seems bullish. There is a projected target in the range of 4,850 plus. However, there is strong resistance at 4,725-4,750 which has halted upmoves. A positive signal would be a Nifty close above 4,750. There's good support between 4,550-4,600 which held through last week.
Rationale: In the past two weeks, the market has made a breakout and hit a 52-week high (4,743). This shows the long-term trend is positive and ditto the intermediate trend. The erstwhile resistance at the top of the previous trading range (4,350-4,600) now forms the support at 4,550-4,600. The projected target from the breakout should be at least 4,850, given decent volumes on the breakout.
Counter-view: The support between 4,550-4,600 was tested last week and the intra-day low was 4,576. If the market closes below 4,550, the breakout may have failed. Then, most likely, the trend would revert to range trading between 4,350-4,600. Long traders should be prepared to reverse and go short below 4,550.
Bulls and Bears: Realty stocks generated huge volumes and led the bounce. Auto stocks also did well. Both sectors seemed to be running out of steam towards the end of last week in that they were hitting strong resistances. Tata Motors and Maruti may be worth a second look with a 2-3 month perspective.
Other interesting sectors for long traders include sugar, which has seen consistent bullish speculation. Here every stock seems to be moving more or less in tandem. Refiners are also moving up as a group with PSUs such as HPCL and BPCL attracting more support than Essar and Reliance Industries.
The IT sector could continue a pattern of consistent outperformance. Infosys is looking good among the big guns while Satyam generates big volumes. Financials and banks have been underperforming and that trend could change soon.
IFCI is near the top of a trading range and may be poised for a breakout. If there is a move in banking, private sector players such as ICICI, Yes Bank, and Axis will outrun bigger PSUs though Union Bank looks interesting as well.
Apart from sector plays, there is scattered support visible for Astra Micro and Geodesic, both jumped on high volume.
MICRO TECHNICALS
IFCI
Current Price: Rs 58.65
Target Price: Rs 64
As always, the stock is generating large speculative volumes. It seems to have made an upside breakout by climbing above a serious resistance at Rs 56 and hitting a new 52-week high. The target projection would be around Rs 64. Keep a stop at Rs 57 and go long.
Great Offshore
Current Price: Rs 548.75
Target Price: Rs 565
The stock has seen consolidation at a support of Rs 530 followed by a climb to current levels on good volumes. It has a likely target of Rs 565 and it could climb till around Rs 585. Keep a stop at Rs 540 and go long. Book partial profits at Rs 565.
HPCL
Current Price: Rs 387
Target Price: Rs 405
Strong volumes fuelled an upside breakout last week. The stock is at a new 52-week high. It has a projected target of around Rs 405-410. However, there is some risk because the nearest reliable support is at Rs 375. Keep a stop at Rs 382 and go long. Cover above Rs 405.
Nagarjuna Fertilisers
Current Price: Rs 34.5
Target Price: Rs 38
The stock may be pulling out of an intermediate downtrend and ready for a trend reversal. If it can maintain the current prices for a couple of sessions, it would breach a falling trendline that has been evident since it peaked at around Rs 46 in early June. A climb back to the Rs 38-39 level is possible. Keep a stop at Rs 33.5 and go long.
Tata Motors
Current Price: Rs 508
Target Price: Rs 485
The stock has hit a recent 52-week high of Rs 530 and its looking quite bullish in terms of the long-term trend. However, an intermediate reaction seems to have started and this could continue till support is reached in the region of Rs 480-485. Keep a stop at Rs 515 and go short. Cover below Rs 487.
(The target price and projected movements given above are in terms of the next five trading sessions unless otherwise stated.)
