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| Intermediate trend reversal confirmed |
| Devangshu Datta / New Delhi Jul 27, 2009, 00:21 IST |
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The 2009 peak of 4,693 is the next target and liable to be exceeded soon.
The market tested and broke several resistances to gain substantially. The Nifty was up 4.4 per cent at 4,568.5 points while the Sensex gained 4.3 per cent at 15,378 points. The Defty outperformed, rising 5.25 per cent as the rupee hardened.
The FIIs were consistent net buyers through the week though domestic institutions were moderate net sellers. Breadth and volumes were good with advances outnumbering declines consistently and participation in the rally across most sectors. The BSE 500 gained 4.4 per cent and the CNXIT index was the star performer, rising 8 per cent.
Outlook: The market is running into resistance at current levels. However, it has completed an intermediate correction and seems to be back in bullish mode. This means that the 2009 peak of 4,693 is the next target and liable to be exceeded soon. Short-covering through settlement week could hasten that process.
Rationale: After bottoming at 3,918 (July 13) the market has gained substantially. It has also created a new pattern of higher intermediate peaks. We’d expect this pattern to continue once resistance between 4,600 and 4,700 is overcome. The carryover pattern has been quite strong so far and the FII attitude reversal is partly driven by short-covering considerations.
Counter-view: An alternate possibility is a sequence of several sessions of range trading and consolidation between 4,300 and 4,600. This also seems quite likely. The key support level would be around 4,250. If the Nifty stays above that, the intermediate trend will remain net bullish. Bulls & Bears: There was widespread participation in the rally. At least some of it was due to short-covering. This trend could continue next week and help the recovery.
The IT sector was the standout performer with smaller stocks like First Source and Core Projects doing really well, though HCL Tech and TCS were also strong. Banking saw some underperformance relative to the overall market, but it had a late recovery on last Friday. As usual, private banks are more likely to outperform and one would expect the sector to be a driver through the four remaining sessions of the July settlement. Real estate also saw a bounce from lows while metals did well across the board.
Auto stocks were another set of depressed counters that saw short-covering and selective investment.
MICRO TECHNICALS
Axis Bank
Current Price: Rs 893.95
Target price: Rs 950
The stock has made a low-volume breakout above resistance at Rs 880. It has a potential target of Rs 950-plus and despite the low volumes, this is likely to be achieved due to the lack of recent resistance above Rs 900-level. Keep a stop at Rs 885 and go long. Move the stop up 10 points for every 10-point advance.
DLF
Current Price: Rs 393.75
Target price: Rs 370
The stock has made a sharp recovery but it will hit major resistance above Rs 400. The nearest reliable support is at around Rs 370 and below that, at Rs 345. Keep a stop at Rs 400 and go short. Cover the position at Rs 370. Renew the short position if DLF closes below Rs 370.
First Source
Current Price: Rs 26.05
Target price: Rs 30
First Source is generating huge volumes along with a price-rise. It is testing resistance between Rs 26-27.5. If it does close above Rs 27.5, it will have a new target of Rs 30-31. Keep a stop at Rs 25 and go long. Add to the position if FSL closes above Rs 27.5.
Idea
Current Price: Rs 81.5
Target price: Rs 76
The stock has major resistance at Rs 83 and above. It is not generating enough volumes to overcome that. On the downside the next reliable support is at Rs 75-76. Keep a stop at Rs 83 and go short with a target of Rs 76. If the stock closes above Rs 83, reverse the position and go long with a target of Rs 88. Tata Motors
Current Price: Rs 372.85
Target price: Rs 400
Volumes have shot up in the last two sessions. The stock has cleared a major resistance at Rs 365 and it has a potential target in the zone of Rs 400-405 and a minimum target of Rs 385. Keep a stop at Rs 365 and go long. Add to the position if Tata Motors closes above Rs 385.
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