Upward bias prevails

MACRO TECHNICALS

Since last week's market breakout was backed by enough volumes, the rally should sustain. But a short-term correction can't be ruled out.

AIt proved to be smooth sailing for the bulls after a key resistance was broken on Monday. The Sensex crossed the historic 10,000-mark to close at 10110.97 points for a gain of 3.78 per cent. The Nifty closed ahead by 2.96 per cent ending at 3027.55 points. The Defty was up by 3.03 per cent as the dollar continued to look weak.

Volumes were excellent and improved with the breakout. Breadth signals were poor however since declines consistently out-numbered advances. The broad BSE500 delivered 3.26 per cent gain however. So there was trading interest in both large caps and midcaps and it wasn't a very thin rally.

Outlook: The breakout was backed by enough volumes to suggest that it has some distance to run. There is reliable support at Nifty 3010 (Sensex 10,000) . A correction should be held at this level.

Rationale: The short-term target would be about 3080 (Sensex 10250) after the given high-volume breakout. The market has an intermediate target of about 3150 but that is likely to be achieved only after some sort of correction or a couple of sessions of very high intra-day volatility.

Counter-view: Breadth is thinning out and there are other negative divergences in momentum. This could presage another short-term correction, which could lead to more tests of support at 3000-3010. If the market closes below 3000, it will test 2980.

Bulls & bears: At the levels of individual stocks, the trading patterns are more puzzling. Most pre-Budget rallies are sector-specific.

The latest breakout seems to have been driven by upmoves in a few specific industries and isolated winners across several industries. Even in the sector specific cases, the movement hasn't been general.

Some pharma stocks such as Aventis, Cipla and Ranbaxy led the way while other pharma stocks stayed neutral. A few FMCGs such as ITC and HLL did well.

There were other isolated stock-specific winners such as Grasim, Hero Honda, L&T, M&M, Satyam, Tata Power and Zee. There were some underperformers, which could catch up if the rally continues through the coming week. Three index majors looked weak "� these were ACC, Bharti Tele and Tata Steel.

MICRO TECHNICALS

Hero Honda
Current price: 922
Target Price: 945

---

The stock has made a high-volume breakout, which creates a short-term target of about 945-950. Give the good volumes, this minimum target could be exceeded by a considerable amount. Keep a stop at 890 and go long.

Bharti Tele Ventures
Current price: 364
Target Price: NA

---

Bharti is interestingly poised. The stock has repeatedly tested support at between 360-365 and resistance at 372-375. If it closes below 360, the next reliable support is 345 and below that, 330.

On the upside, a close above 375 would suddenly create an upside target of 400. Wait for a breakout beyond this range and take the appropriate action when it happens.

Larsen & Toubro
Current price: 2312
Target Price: 2380

---

The stock shows signs of developing another strong upmove "� it has juststarted to climb out of a trading range. There is a short-term target of about 2380. Keep a stop at 2225 and go long. Unfortunately, you can expect high intra-day volatility.

Tata Power
Current price: 505
Target Price: 570

---

The stock made a long-term breakout when it closed above 485 on strong volumes. This has a short-term target of 515 and a long-term target of 570, which could be achieved over the next 4-8 weeks. Keep an initial stop at 485 and go long. Move the stop up 5 points for every 10-point rise beyond the 515 mark.

Zee Telefilms
Current price: 162.7
Target Price: 180

---

The stock shot up on high volumes on Friday. If it closes above 165, it would have a target of 180. There is fairly strong resistance at 165 but it seems worth a punt because there's also strong support at 159-160. Take a long position with a stop loss at 159.

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