Trading in a narrow range

MACRO TECHNICALS

Clear trend will only be established if Nifty closes outside the 3075-3200 range.

Despite a crash on Friday and train bombings, the market ended up on a week-by-week basis. The Sensex closed at 10678 points, up by 1.61 per cent, while the Nifty was up 1.54 per cent, closing at 3123. The Defty was up 0.98 per cent as the rupee dropped.

Breadth signals were fair. Volumes were moderate through the week but advances outnumbered declines although action was concentrated in the pivotals. The BSE500 was up 0.94 per cent.

Outlook
The market seems to have entered a phase of narrow range-trading. There's support at Nifty 3075 and resistance at about 3200. Since the market is near the lower end of this zone, it's more likely to go up next week. A clear trend will only be established if the Nifty closes outside the 3075-3200 range after moving with a volume expansion.

Rationale
The intermediate trend went positive in mid-June. It's probably still positive because the market has taken a lot of pressure in the last week without complete breakdown.

But there aren't enough volumes being generated for a pattern of higher highs to be maintained. The 3075-3200 marks are easy to monitor so wait for a breach of either end of this scale.

Counter-view
It's very likely that the long-term trend is negative given the crash that started on May 11. If that is so, this is the last kick of a dying bull and the next downturn will push it to lows below the June 14 mark of 2595.

Bulls & Bears
Most stocks are mimicking the same range-trading pattern as the indices. A few have already made breakouts. Several IT/ ICE scrips are trading up after significant breakouts.

This list includes Infosys, I-Flex, Polaris, Satyam, TCS and Zee Telefilm. A few scrips have made downside breakouts "� this list includes Bajaj Auto, BPCL, HPCL and Ranbaxy.

It's likely that these "front-running" stocks will eventually provide direction to the indices. But right now, the upside-downside breakouts also seem evenly balanced!

MICRO TECHNICALS

Bajaj Auto
Current price: 2642.8
Target price: 2600

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Bajaj has seen a downside breakout accompanied by a volume expansion. It has support between 2550-2600 and the scrip is likely to land somewhere in that zone Keep a stop at 2680 and go short. Cover below 2600.

Infosys
Current price: 1681.95
Target price: 1800

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The scrip shot up on strong volume action on Thursday before seeing some profit-taking on Friday. It has an extremely good chance of going back to the 1800 level in the next couple of sessions. Keep a stop at 1670 and go long.

Polaris
Current price: 90.75
Target price: 105

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Polaris has seen a jump in price accompanied by a big volume expansion. There should be a minimum target between 102-105. The move has been quite strong so, it may exceed minimum targets. Keep a stop at 87 and go long.

Ranbaxy
Current price: 335
Target price: 305

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The stock has made a downside breakout below support at 345, (which will now act as a resistance). The likely target is about 320 and there is a possibility of a drop to 305. Keep a stop at 345 and go short. Cover partially at 320.

SBI
Current price: 737.4
Target price: 815 (long-term), 765 (short term)

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The SBI scrip has almost completed a bottoming formation, moving between support at 715 and resistance at 740. It looks worth accumulating a delivery position in this zone because there is a probable target of 815-820 which should be attained over the next 3 weeks.

In the short-term, a breakout above 745 would take a scrip to a minimum target of 765.

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