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| Potential target of 4,750 |
| Devangshu Datta / New Delhi Jun 01, 2009, 00:44 IST |
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Unless the Nifty closes above 4,510, the mini-breakout may not materialise.
The market continued to register net gains through a high volume settlement week. The Nifty closed at 4,448.95 with a gain of 4.96 per cent. The Sensex was up 5.31 per cent at 14,625 points.
The Defty was up only 4.7 per cent since the rupee lost a little ground. Volumes were good – as expected since it was settlement week in a high-volume month.
Advances comfortably outnumbered declines. Every major sector registered double-digit advances with Bank and IT both outrunning the major indices. The FIIs and domestic institutions were strong net buyers. The BSE 500 rose 5.4 per cent.
Outlook: The market is meeting resistance above 4,450. If it closes above 4,510, another mini-breakout will be completed with a target of about 4,750. If it fails to break 4,510, range-trading between 4,300-4,500 is the most likely outcome. However, there are signs that the market is overbought and the time factor is against a massive breakout.
Rationale: The Nifty has risen 28 per cent in the last month and over 75 per cent from the March 6 low of 2,539. The major trend appears to have clearly reversed and turned positive, but the intermediate trend has now been up for 11 weeks, which is unusually long. There is a good chance of the market going into either a consolidation or a correction.
Counter-view: The first intermediate uptrend in a bull market can be very strong and last for quite a long time. It is possible that the uptrend will continue through next week. To repeat, the market is most likely to head up or to consolidate. If it does correct, the first sign will be a dip below 4,240. If a correction does occur, it will probably be quite deep.
Bulls & Bears: Outperformers in the last month include most stocks in the banking and real estate sectors. Metals have also seen a sudden price rise. IT scrips underperformed over the month but they certainly gained last week.
FMCG and pharma have been the duds by and large. If the trend reverses and a correction starts there may be profit-booking in high flyers followed by cash coming into these counters.
In terms of specifics, relatively smaller banks are more likely to outperform and DCB, Vijaya and Yes Bank all look as though they could beat the Bank Nifty.
In the real estate segment, Indiabulls Real Estate is coming into the reckoning, while DLF and Unitech also look reasonably bullish. There is selling in HDIL. The telecom segment is mixed with Idea looking superior to Bharti Airtel and Reliance Communications.
In most of the heavyweights, the chart patterns look both tempting and dangerous. Stocks are overextended and appear overbought. Many also appear capable of attracting a further burst of buying.
To add to the tension, there is every evidence of greater than normal volatility. Keep disciplined stops and enough margin in hand to double-reverse a position.
MICRO TECHNICALS
Dish TV
Current Price: Rs 48.55
Target Price: Rs 60.00
The stock has completed a bullish formation and made a breakout on expanding volume. It is in new territory so projections are tough. Chart patterns suggest that it could move till around Rs 60. Keep a trailing at Rs 45.5 and go long. Move the stop up 5 points for every 5 point move in price.
Gujarat NRE Coke
Current Price: Rs 43.00
Target Price: Rs 47.00
The stock has completed a bullish formation and a breakout on reasonable volumes. It has an upside till around the Rs 47 level before it runs into serious resistance. It has a good chance of running past that until the Rs 56 level. Keep a stop at Rs 41 and go long. Book partial profits at Rs 47.
ITC
Current Price: Rs 184.00
Target Price: Rs 195.00
The stock has underperformed through the last bull run. However, it could be a counter-cyclical that offers protection if the cycle changes. A recovery till the Rs 195 level is likely and if it closes above Rs 197, it could rise till around the Rs 205 level. Keep a stop at Rs 180 and go long,
Unitech
Current Price: Rs 79.60
Target Price: Rs 70.00
The stock is likely to run into heavy resistance just above the current level. If there is selling pressure, it has a potential downside till Rs 70. Keep a stop at Rs 82 and go short. If it does close above Rs 84 however, it could move till around the Rs 94 level. So, be prepared to reverse the position if that happens.
HCC
Current Price: Rs 118.00
Target Price: Rs 135.00
HCC completed a breakout at Rs 106. Depending on optimism levels, the projected target could be anywhere between Rs 125-135. Keep a stop at Rs 110 and go long. Book partial profits at Rs 125 and clear the position at Rs 135.
(The target price and projected movements given above are in terms of the next five trading sessions unless otherwise stated.)
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