Intermediate trend bullish, short-term trend neutral
The market registered new 18-month highs as it closed out the last settlement of 2009 with small net gains. The Nifty closed at 5,201.05 for a gain of 0.4 per cent. The Sensex closed at 17,464 for a gain of 0.6 per cent. The Defty was up 0.65 per cent as the rupee strengthened.
Breadth was decent in terms of a wide variety of shares being traded. Advances outnumbered declines comfortably. The FIIs were net buyers while domestic institutions were net sellers. However, volumes were down except on settlement day though that can be explained by the holiday spirit. The BSE 500 and the Midcaps were both up by about 0.6 per cent.
Outlook: The intermediate trend looks bullish but the short-term trend is difficult to diagnose. The market may be range bound between 5,100-5,250 in the early sessions of next week. The bullish intermediate trend suggests that the next target would be about 5,300. Expect intra-day volatility and volumes to rise regardless of market direction.
Rationale: Last week saw thin trading and tightly range-bound movement between 5,150-5,220. A movement beyond 5,225 and a close beyond that would reinforce earlier target projections of 5,300. On the downside, the intermediate trend will only be threatened if the market moves below 4,950.
Counter-view: Early January sometimes sees a continued absence of volumes, particularly until FIIs have established their attitude for the new fiscal. If volumes don't pick up, the market could drift downwards. Also the breadth of trading suggests that there is speculative retail participation and that sometimes comes right before a major correction.
Bulls & Bears: The IT index was the only underperformer last week, perhaps due to the rupee strengthening. Sector-wise, there was some selling in pharma. The rest of the market registered net gains but as mentioned above, on generally low volumes and with very little volatility. One sector-wise "long" possibility is PSUs since there appears to be selective buying across several PSU majors.
As such, it is difficult to target shorts and in most stocks, the trader should wait and watch for clear trends to be established before making large commitments. Stick to the highly liquid stocks in the F&O segment rather than dabble in smaller scrips that are retail-backed or operator-driven. In the absence of institutional participation, smaller scrips are more vulnerable to sell-offs.
MICRO TECHNICALS
NTPC
Current Price: Rs 235.65
Target Price: Rs 245
The stock has made a recent surge on high volumes. It has cleared severe resistance at Rs 230 and appears to have a minimum target of Rs 245-250 and it may run till Rs 260. Keep a stop at Rs 230 and go long. Consider booking partial profits at Rs 245 and reset the stop to Rs 240 and the target to Rs 255.
SBI
Current Price: Rs 2,269
Target Price: Rs 2,375
The stock has recovered from recent lows of Rs 2,135 aided by short-covering. It is capable of moving up till around Rs 2,350-2,375 before it hits heavy selling pressure. Keep a stop at Rs 2,240 and go long. Start booking profits above the Rs 2,350-mark.
PRAJ INDUSTRIES
Current Price: Rs 105.7
Target Price: Rs 110
The stock appears to have completed a bullish formation. It should have a target in the range of Rs 115-120 but there is strong resistance at Rs 110. Go long with an initial stop at Rs 101. Above Rs 109, you can exit. Or else, book partial profits at Rs 110, reset the stop loss to Rs 107 and reset the target to Rs 115.
DLF
Current Price: Rs 361.2
Target Price: Rs 385
The stock is consolidating and trading in a wide range between Rs 350-390. It could move up till the Rs 385-390 level if it develops a little volume. Keep a stop at Rs 355 and go long. Increase the position beyond Rs 370 and book profits beyond Rs 385.
NATIONAL ALUMINIUM
Current Price: Rs 417.9
Target Price: Rs 440
A recent burst of buying has pushed the stock up past resistance at Rs 405. The target would be something like Rs 440. Keep a trailing stop at Rs 405 and go long. Book partial profits at Rs 430 and reset the stop loss to Rs 425.
