Consolidation between 4,100-4,300

Profit-booking and consolidation is more likely than another test of the 4,500 level.

The market hit upper circuits for the first time in its history. After a high of 4,509 on Tuesday, the Nifty weathered profit-booking and closed at 4,238.5 points for a whopping gain of 15.4 per cent. The Sensex exhibited similar behaviour, to cross 14,000 before closing at 13,887 for a gain of 14 per cent. The Defty gained 21 per cent as the rupee rose by 4.65 per cent to Rs 47.19.

The election results have caused a phase change. Volumes multiplied with a couple of record sessions. Advances outnumbered declines by a large number. Almost every sector and every index registered double-digit gains.

The Midcaps-50 rose 29 per cent while the BankNifty rose 23.5 per cent and the broad BSE 50 was up 17.9 per cent. FIIs were net buyers, thanks mainly to the massive Rs 5,000 crore buying, on Tuesday. Domestic institutions played second fiddle.

Outlook: Settlement is coming up. Profit-booking and consolidation is more likely than another test of 4,500. The market has twice found support at 4,150. There is resistance at 4,300. The most likely trend is volatile range-trading between 4,100-4,300.

Rationale: After such a massive spike, profit-booking is more likely than another instantaneous surge. Obviously last week was an inflection point and it seems extremely likely the long-term trend has reversed for the better. But short-term signals are overbought and the intermediate trend has now been up for 11 weeks and should be close to maturity.

Counter-view: One danger is lack of recent trading between 3,650-4,150, which means that support between those zones is tenuous.

Fibonacci retraction calculations suggest that 4,100-4,150 would be key support zone. If the 4,100 support is broken, the next support would be at 4,000 and below, at 3,900. These are levels last traded in late September 2008. Upmoves beyond 4,300 would run into resistance all the way till 4,500.

Bulls & Bears: Given that almost every stock gained week-on-week and most stocks went through profit-booking in the past three sessions, it's difficult to pick likely winners. We've seen price rises with volume expansion across the board. We've also seen correction on profit-booking. Many counters still seem over-extended. Support and resistance levels are difficult to calculate because of price gaps. 

Even the IT sector went up despite the strong rupee on the back of second-rank stocks such as NIIT, FSL, Rolta although TCS and Wipro saw losses.

But the biggest winners were the financials and real estate counters with several infrastructure companies also doing exceedingly well. There was also some speculative interest in PSUs that could be potential disinvestment targets.

MICRO TECHNICALS

GMR Infra
Current Price: Rs 168.65
Target Price: Rs 150

The stock has made a vertical take-off from Rs 115 five sessions ago. It’s exceeded all target projections. It's hitting resistance above Rs 171. On a correction, a retraction till Rs 150 would be expected. Keep a stop at Rs 172 and go short. Cover at Rs 150. If the stop loss is broken, go long, with a trailing stop at Rs 164. 

Praj Industries
Current Price: Rs 106.95
Target Price: Rs 120

The stock has made a strong breakout on expanded volumes. It has a potential target of 120 with heavy resistance above that level. On the downside, the nearest support is at 102. So there's a fair amount of risk. Keep a stop at Rs 102 and go long. If Rs 102 is broken, the next support is Rs 96 so going short is possible. 

HDIL
Current Price: Rs 306.50
Target Price: Rs 285

The stock faces massive resistance at current levels and volumes are easing off, which is usually a bearish signal. A sell-off could push HDIL down until the Rs 285-290 zone. If it does beat resistance at Rs 306-307, it's likely to move up till around Rs 315. Keep a stop at Rs 309 and go short. Cover below Rs 290.

Suzlon Energy
Current Price: Rs 94
Target Price: Rs 77

There's a big gap between Rs 77-86 due to the jump on Monday. Since then, the stock has traded within a range of Rs 86-99 with the bulk of the trades between Rs 91-93. There is support at Rs 89. Profit-taking could induce a downtrend that fills the gap. Keep a stop at Rs 97 and go short. Increase the position below Rs 86.

ONGC
Current Price: Rs 1,046
Target Price: Rs 1,125

The stock saw profit-taking at the Rs 1,125 level and seems to have found support around Rs 1,020. Volumes have been extremely good. It could test resistance at Rs 1,125 again implying a potential 7 per cent upside. If it does close above Rs 1,125, the target will be Rs 1,250. Keep a stop at Rs 1,015 and go long. Book profits above Rs 1,100.

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