Volumes key for breakout

MACRO TECHNICALS

Movements will be stock-specific rather than index-driven.

The market remained inside a trading range but trended upwards. The Nifty rose 2.81 per cent to close at 4777.8 while the Sensex rose 3.03 per cent to close at 15,807. The Defty was up 2.94 per cent. Volumes were quite low "� the new fiscal has coincided with a further drop in volumes.

Advances were somewhat ahead of declines and smaller stocks outperformed the bigger ones. The Junior was up 4.19 per cent while the Midcaps rose 4.05 per cent and the BSE 500 rose 3.77 per cent.

Both FIIs and domestic institutions remained net sellers in April though the domestic institutions were buyers in the past couple of sessions.

Outlook: More range trading looks to be on the cards. Intra-day volatility eased last week as well. The Nifty is likely to stay inside 4600-4900 next week as well. A breakout below 4550 or above 4950 would be meaningful only if it comes on a volume uptick. However, there could be a lot of movement in specific stocks.

Rationale: Lower daily volatility, coupled with lower volumes is typical range-trading behaviour. The intermediate trend seems to be neutral, the long-term trend is down and the short-term trend is also neutral.

Any serious move would need volume to bust very well-defined support-resistance levels. With the institutions showing apathy, that's not likely so soon.

Counter-view: We are in a long-term bear market. That makes a downtrend somewhat likelier than an uptrend. The first wave of 2007-08 results and guidance from majors like Infosys will be announced next week and Dalal Street is expecting bad news. If that is confirmed, the market will probably head down.

Bulls & bears: Next week the movements are likely to be influenced heavily by results. The CNXIT Index is more likely to head down than up unless Infy pulls a giant rabbit out of its guidance hat.

The IT bellwether saw selling in the last two sessions. Banks started well and the BankNifty gained 4.5 per cent week-on-week but the last two sessions saw weakness. The ADA Group scrips REL, Rel Capital and Mukesh Ambani Group's RIL and RPL all saw sharp rises on what appeared to be short-covering.

Apart from that, moves were very stock-specific. Companies that saw bullish action included Aban Offshore, Bata, Bhel, Cairn, Divi's Lab, Essar Oil, Gateway Distriparks, Gujarat Alkalis, Hind Construction, Oracle Fin, L&T, Neyveli Lignite, Orchid Chemical, Pantaloon, Punj Lloyd, Sasken Communications and Tata Power.

MICRO TECHNICALS

Cairn India
Current Price: Rs 252
Target Price: Rs 260-265

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The stock has risen from 220 levels on the basis of strong volumes. It completed a bullish formation at 250-plus. The target should be about 270 but there is very strong resistance between 260-265. Keep a stop at 245 and go long. Start covering above 260.

Gateway Distriparks
Current Price: Rs 109
Target Price: Rs 120

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The stock has spiked up on a sharp volume expansion. There's room for a rise till the 120 levels if the volumes are sustained. At above 118, it will run into very strong resistance. Keep a stop at 103 and go long. Cover above 118.

Gujarat Alkalies
Current Price: Rs 180
Target Price: Rs 210

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Gujarat Alkalies has climbed from the 130 level in mid-March and it gained 20 per cent in the past week. There has been some volume expansion. Target projections on the current chart patterns suggest that it has the potential to reach the 210 level. There isn't much resistance between that and the current zone. Keep a stop at 175.

Infosys Technologies
Current Price: Rs 1,422
Target Price: Rs 1,300

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There has been selling on massive volumes in the past two sessions. The stock is poised on the last reliable support and if closes below 1400 on Monday, it's liable to dip till at least 1300 levels. Be prepared for an opening with a gap and a big intra-day move which is likely to be bearish. Tentatively, go short with a stop at 1450 and add to the position if the price drops below 1400.

Sasken Communications
Current Price: Rs 136.6
Target Price: Rs 160

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There was massive institutional buying on Friday. The stock completed a bullish saucer formation. The target would be about 160. Keep a stop at 130 and go long. Book partial profits at 150 because there is resistance starting at that point.

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