Trend remains positive

MACRO TECHNICALS

Since the markets are in a completely new territory, it's impossible to set targets.

The market continued to move upwards on an unending flood of liquidity. The Sensex ended the week at 8380.96 points with a week-on-week gain of 3.98 per cent. The Nifty ended the week with a gain of 3.95 per cent and a closing value of 2552.35 points. The Defty was up 3.87 per cent.

Breadth was good. Volumes were up through the last three sessions when the market rose strongly. Advances outnumbered declines by a comfortable number. The market put-call ratio remained neutral. The broad BSE500 was up 3.75 per cent.

Outlook: The market trend is obviously up. Since we're in completely new territory, it's impossible to set targets. Right now, the momentum and breadth indicators are all bullish so, this run could continue. In the next correction, there will be support at 2520 (Sensex 8275) and again between 2480-2500 (8200-8225).

Rationale: Since the losing session on August 29, the market has marched steadily ahead. It's running up along a trendline of about 45 degrees - while this should be unsustainably steep in the long run, on a session-by-session basis, it seems to be continuing. Since momentum and breadth indicators are up, there's no apparent reason why the market should break this week.

Counter-view: A trendline of 45 degrees is usually unsustainable. So is a run of 13 straight winning sessions. So a correction is overdue. When it does come however, there's a lot of support just below current prices.

Bulls and bears: There were practically speaking, no bears in evidence this week. Stocks were either going straight up or experiencing very mild corrections. PSU stocks appeared to be in focus. The oil sector in particular were seeing a lot of buying and so were the PSU banks.

The oil stocks may continue their bull run this week though the banks appear to be slowing down. Bullish action was in evidence across BPCL, HPCL, Chennai Petro and ONGC.

In the banking and finance sector, although SBI and the other PSU banks were looking due for corrections, there could be continuous upwards movement in HDFC, ICICI, LIC Housing and IDBI.

Other stocks that seemed to interest bulls included Apollo Tyres, Arvind Mills, Bilt, Century Textiles, CMC, Crisil, GNFC, Hindustan Lever, Hindalco, IPCL, L&T, Mastek, Maruti, NTPC, Sesa Goa, Sterlite, Thermax, Tata Steel and Titan.

MICRO TECHNICALS

LARSEN & TOUBRO
Current price: 1360
Target price: NA

L&T is testing resistance at 1365. Once that is overcome, it would have a short-term target of 1390. There's good support at 1340. The stock has the potential to go much further than 1390 though targets can't be projected. Keep a stop at 1340 and go long.

LIC HOUSING FINANCE
Current price: 216
Target price: 230, 250

The stock has started to move up on decent volumes. It has a likely target of 230 and if it overcomes resistance between 230-235, it could move till around the 250 mark. There is good support at 210. Keep a stop at 210 and go long.

MARUTI UDYOG
Current price: 562
Target price: 575, 685

The stock has risen sharply on good volumes and it's testing a key resistance between 570-575. Unfortunately, the nearest reliable support is at 520 because the rise has been so steep. However if MUL manages to close above 575, it will have a target of 685. Either wait and watch for a close above 575 or keep a stop at 520 and go long.

THERMAX
Current price: 790
Target price: 830

The stock has climbed steadily through the last 30 months. It has just completed another bullish short-term formation to reach an all time high. The target should be around 830 and there is good support at 770. Keep a stop at 770 and go long.

ONGC
Current price: 1021
Target price: 1050

The stock has either completed or is very close to completing a bullish formation on rising volumes. It should have a target in the region of 1050 and, in the event of a correction, there is strong support at 1010. Keep a stop at 1010 and go long.