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| Testing resistance near 200 DMA |
| Devangshu Datta / New Delhi Apr 20, 2009, 00:22 IST |
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If the Nifty closes above the 3,450 mark, it could move up further to 3,650 levels.
The market continued to register net gains but the momentum slowed as it hit resistance. The Nifty closed at 3,384 points with a gain of 1.26 per cent, while the Sensex was up 2 per cent at 11,023 points. The Defty gained 1.5 per cent as the rupee stayed above 50.
Volumes expanded as both FIIs and domestic institutions continued to be enthusiastic buyers. The advances-to-declines ratio was quite positive and sector indices generally showed gains with the exception of the IT sector. Smaller stocks outperformed with the Nifty Junior up 4.5 per cent, while the Midcap 50 rose 4 per cent and the BSE 500 rose 2.7 per cent.
Outlook: There is massive resistance above the current levels. The market has tested that resistance several times without overcoming it. A close above 3,450 would be very positive, setting up targets in the range of 3,650. If the uptrend breaks, there would be primary support at 3,250, second support at 3,050 and tertiary support at 2,850.
Rationale: The Nifty’s 200 Day Moving Average (DMA) is hovering above 3,400 (between 3,410 and 3,430 depending on calculation methods) and also, there was a lot of trading in this zone before the October 2008 crash. The market has been trending up since it made a recent low of 2,539 on March 6. A climb above 3,450 would suggest that the long-term bearish trend is being challenged.
Counter-view: The intermediate trend could be maturing after six weeks. It may be due for a reversal with the elections having started and the settlement within sight. Expect high volatility in any case, and be prepared for profit-booking that may turn into an intermediate trend reversal.
Bulls & bears: Banks and real estate stocks remained the major market drivers. Real estate in particular saw massive gains with counters like Unitech, HDIL and Peninsula registering double-digit gains on several sessions. The Bank Nifty rose by over 10 per cent with both private sector and PSU banks doing well on the back of long-awaited rate cuts.
In sector terms, IT stocks were the only major losers with Infosys’ pessimistic guidance having sparked a reaction. All IT biggies saw some losses including Tech Mahindra, which was sold off following initially positive reactions to the Satyam deal.
But, there was short-covering in IT on Friday and some speculative bullish action in HCL Tech. Among other sectors, engineering stocks like Power Grid, ABB and L&T showed exceptional strength. There were signs of an impending downturn among metal stocks with Hindalco, Tata Steel and Sail all headed down on Friday.
MICRO TECHNICALS
UNITECH
Current Price: Rs 52.7
Target Price: Rs 57
The stock has shot up almost vertically on a huge volume expansion. It has a potential upside till the Rs 57 level. The risk is fairly high since the next reliable support is at Rs 48 and there has been a lot of intra-day volatility. Keep a stop at Rs 51 and go long. Start booking profits at above Rs 56.
HCL TECH
Current Price: Rs 129
Target Price: Rs 145
The stock appears to have reliable support at about Rs 125. Speculative buying could push the stock till the Rs 140 level and maybe higher till around Rs 150. Keep a stop at Rs 125 and go long. Book partial profits at Rs 140 and clear the position above Rs 145.
POWER GRID
Current Price: Rs 97
Target Price: Rs 110
The stock has seen a solid uptrend since it hit a low of Rs 56 in October. It is testing a key resistance at the Rs 98 level and if it closes above that, it will test a second resistance at Rs 102. Above Rs 102, the stock has a clear run till around Rs 110-115. Keep a stop at Rs 94 and go long. Increase the position above Rs 102.
HDFC BANK
Current Price: Rs 1,071
Target Price: Rs 1,020
The stock has hit resistance at the Rs 1,100 mark and started reacting. It has reasonable support at Rs 1,050, but target calculations suggest it is more likely to travel down till around the Rs 1,020 mark. Keep a stop at Rs 1,085 and go short. Book partial profit at Rs 1,050.
TATA STEEL
Current Price: Rs 258
Target Price: Rs 240
The stock has reacted sharply after hitting a resistance at Rs 297. It rose on huge volumes and the profit booking is also coming on strong volume action. There is some support at Rs 247 and below that, at Rs 240. Fibonacci retracement calculations suggest that Rs 240 is likely to be the target. Keep a stop at Rs 265 and go short.
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