Look for a breakout above 4,625

The intermediate trend is weak despite the net gains last week

The market registered net gains while moving inside a relatively narrow range. The Nifty was up 2.2 per cent, closing at 4,580.05 points while the Sensex gained 1.66 per cent at 1,541 points. The Junior was ahead by 2.6 per cent while the Defty gained only 1.24 per cent due to rupee weakness.

Breadth was average with advances somewhat outnumbering declines. Volumes were low and dropped all week. The BSE 500 rose by 2.2 per cent and the Midcaps outperformed, rising 4 per cent. FIIs remained sellers but domestic institutions continued to be heavy buyers. The CNXIT rose more than the general market as did the Bank Nifty.

Outlook: The Nifty is stuck between support at 4,350 and resistance above 4,600. There are no definitive indications of possible breakout direction. A close below 4,400 or a close above 4,625 would signal breakout with a likely further move of 150 points in the direction of breakout. The market did see lower lows this week, which coupled with poor volumes, could mean the intermediate trend is weak despite the net gains.

Rationale: The intermediate trend was clearly up between July 13 (bottom of 3,918) and August 5 (2009 peak of 4,731). Since then, we have seen a correction to a recent bottom of 4,359. It is unclear if the intermediate trend remains up or not, given the range-trading of last week. Confirmation would only occur on a breakout where a higher-high (beating 4,731) or a lower low (below 4,350) is hit.

Counter-view: As of now, the long-term trend trend seems up. On the last correction, the market held close to the first Fibonnacci support of 4,420, which is generally a sign of continued bullishness. In these circumstances, the intermediate uptrend that began on July 13 is likely to continue after this phase of correction and consolidation.

Bulls and Bears: Oil and gas producers like Cairn and ONGC went up and so did stocks along the gas value chain like Petronet, IGL and Gail. Sugar stocks plummeted.

Bank shares generated surprisingly little volume although they did outperform the Nifty and this sector’s direction could be the key to next week’s direction. The CNX

Realty index gained substantially on the back of high volumes in DLF, Unitech,

Indiabulls Real Estate and HDIL. Power sector scrips went through a correction on Friday

when stocks such as NTPC, J P Hydro, saw sell offs. IT saw net gains but smaller scrips were more volatile.

Micro technicals

NTPC
Current Price: Rs 206.05
Target Price: Rs 221

The stock has seen a sell-off from a recent high at Rs 220. It has reasonable support at the current levels and it could bounce back to the Rs 220-225 level. Volumes have remained decent and gained in the past two sessions. Keep a stop at Rs 202 and go long. Book profits above Rs 220.

AXIS BANK
Current Price: Rs 870.1
Target Price: Rs 905

Volumes eased off through the week while the stock jumped on Tuesday and then traded sideways. It has decent support at just below current levels and the potential to move till Rs 900-920 on any serious volume expansion. Keep a stop at Rs 860 and go long.

TATA STEEL
Current Price: Rs 469.95
Target Price: Rs 445

The stock could be counter-cyclical. It has seen a price recovery in the last couple of sessions at a time when the overall market has looked weak. It is hitting resistance at Rs 475-480 and it may slide till the Rs 440 level next week even if the overall market rises. Keep a stop at Rs 475 and go short. Cover below Rs 445.

PETRONET
Current Price: Rs 71.65
Target Price: Rs 76

The stock seems to have made an upwards breakout on high volumes on Friday. It could have target in the range of Rs 76-78 but it also runs into heavy resistance in that zone. Keep a stop at Rs 69 and go long. Book profits above Rs 76.

ONGC
Current Price: Rs 1,220.5
Target Price: Rs 1,270

The stock has shot up on expanded volumes to hit a new 2009 high. It’s difficult to make target projections in a new zone but the minimum projection would be around Rs 1,270. Keep a trailing stop at Rs 1,195 and go long. Move the stop up 20 points for every 20-point upmove.