Expect a short correction this week

MACRO TECHNICALS

The background signals continue to look weaker than they should in a market running at record highs.

The market continued to make net gains despite two sharp intra-day corrections. The Sensex closed at 13,703.33 points on a week-on-week gain of 2.04 per cent.

The Nifty was up 2.54 per cent, closing at 3950.85 points. The rupee gained against the dollar and the Defty responded with a 3.01 per cent weekly gain.

Breadth signals were average. Advances outnumbered declines by a marginal amount. Volumes tapered off towards the end of the week after a spike on Wednesday.

The broad BSE 500 rose by 2.49 per cent. The CNX IT outperformed the broader indices considerably, jumping by 4.82 per cent. The Bank Nifty moved up only nominally.

Outlook: The background signals continue to look weaker than they should in a market running at record highs. Another short correction may occur next week. The market could dip till Nifty 3800 and recover without the major trend being affected. A close below 3775 would signal a trend reversal.

Rationale: Volumes dipped in the last two sessions; intra-day volatility was up in the first three days. If we have a high-volatility session with low volumes, that would trigger a significant correction. Monday's (Nov 20) low of 3794 marks a significant support.

Counter-view: Whatever the background signals, the trend has continued to run up for over five months. You have to respect a trend that is strong.

It will eventually break but it would be dangerous to expect this to happen next week or to trade the indicators before the price line confirmed any apparent weakness.

Bulls & bears: Both the buying and selling trends were scattered across different sectors and there isn't an industry-wide trend in the current trading patterns. Next week's settlement will guarantee volume concentration in F&O stocks so, there isn't much point in looking outside that list.

The winners this week included Bhel, Bajaj Auto, Bank of India, Dr Reddy's, i-flex, IVRCL, Glaxo, GMR, Hindalco, MTNL, NTPC, State Bank of India, Tata Power, Tisco and Zee Telefilms.

Siemens took a hammering and there was apparent high-volume selling in Bharti as well.

MICRO TECHNICALS

Bank of India
Current Price: 200
Target Price: 210

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The stock has shown a stable uptrend with a little burst on Friday that pulled it above resistance at 195. It has a target of 210. Keep a stop at 195 and go long. The long-term trend looks very promising, so it's possible to keep a delivery position for around 3-4 weeks.

i-flex
Current Price: 1649.45
Target Price: 1700

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i-flex broke out of a trading range on fairly high volumes last week. It has a probable short-term target of 1700 and it may go further. Keep a stop at 1630 and go long. The long-term formation suggests that a target of 1900 may be within reach in the timeframe of three-four weeks.

IVRCL
Current Price: 424
Target Price: 465

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The stock has risen vertically on high volumes in the past five sessions. It's possible to project a target of about 465 using weekly charts but this sort of formation is notoriously difficult to accurately project.

Keep a stop at 400 and go long. The huge moves have unfortunately made it imperative to keep wide stops since there are no reliable supports close to the last price.

NTPC
Current Price: 150.15
Target Price: 170

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NTPC saw a big session on Friday when the price moved through a range of 133-151 and closed near the top. The likely target is about 170-175. Keep a stop loss at about 144.

Zee Tele
Current Price: 369.4
Target Price: 385, 410

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The stock has made a breakout but it has come on average volumes. Depending on how optimistic you feel, it's possible to project targets of either 385 or 410.

Keep a stop at 360 and go long. Book partial profits above 380 - the lower target is more likely because of the relatively low volumes.

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