Monday, April 6, 2009

Testing resistance above 3,200

Testing resistance above 3,200 Devangshu Datta / New Delhi April 6, 2009, 0:54 IST While some factors weigh heavily on the markets, the uptrend has been powerful and Nifty may scale 3,450 before slipping to lower levels. The market continued to register strong gains in line with an upturn in global sentiment. The Nifty was up 3.3 per cent at 3,211 points while the Sensex rose 3 per cent to 10,349 points. The Defty rose 3.9 per cent as the rupee hardened slightly. Foreign Institutional Investors (FIIs) were net buyers through March and so were domestic institutions (FIs). The breadth signals were good with advances outnumbering declines and gains in most industry indices. Volumes have improved in both derivatives and cash segments. The BSE 500 was up 3.6 per cent while the Midcap 50 was up 5.5 per cent. Outlook: The market is running into resistance above 3,200 – there are barriers at 3,250 and 3,280. If it overcomes that, it could run till around the 3,450 levels. However, a downturn could push prices back till 2,950 at the least and maybe, much lower. Rationale: There is strong resistance, political uncertainty and some signs of an overbought index. However, the trend has been pretty powerful and there is a fair chance that it will push up to the 3,450 level before petering out. Counter-view: The intermediate trend has been up since mid-March. If it fades by mid-April, electoral considerations could drive the index back till the 2,500 levels. This may be a gigantic bull trap with an 800-point downside. Either way, expect volatility to continue rising and intra-day Nifty ranges of 150-points plus until the next government is formed. Bulls & Bears: Practically every sector index has gained in the past three weeks. Right now, specific stocks have price-lines that are either hitting resistances or in a few cases, clearing them. Some late-movers may have the ability to run up further. Financials slowed down slightly last week. The BankNifty underperformed the Nifty. But, auto and real estate biggies did well and so did a couple of engineering majors. IT scrips may react from higher levels as the market gears up for results and the rupee stabilises. However, TCS and Infosys both seem to have decent price-lines at the moment. Traders should probably focus strictly on big pivotals since liquidity can become a factor in a reaction and there are few stocks that appear likely to run counter to the overall market trend. MICRO TECHNICALS INFOSYS Current Price: Rs 1,419 Target Price: Rs 1,470 The stock has made an upwards breakout on slightly increased volume. On price-line alone, one could expect a top at around the Rs 1,475 mark. On the downside, the next reaction would find support at about Rs 1,380 and then at Rs 1,330. Go long with a stop at Rs 1,400 and book profits above Rs 1,465. LARSEN & TOUBRO Current Price: Rs 718 Target Price: Rs 750 The stock has broken resistance at Rs 700-level on expanding volumes. It has a potential target of Rs 750 with some resistance at about Rs 727-730. Keep a stop at Rs 710 and go long. As and when it closes above Rs 730, may be worth adding to the position. Cash out above Rs 750. RELIANCE INDUSTRIES Current Price: Rs 1,661 Target Price: Rs 1,565 The stock has shot up on high volumes. It has fulfilled and exceeded a target of Rs 1,645 set up when it broke out beyond Rs 1,400. In the past two sessions, trading volumes have eased. Any reaction could push it down till Rs 1,565. Keep a stop at Rs 1,685 and go short. STATE BANK OF INDIA Current Price: Rs 1,147 Target Price: Rs 1,100 The stock has moved on massive volumes. It is running into resistance around the Rs 1,140-1,160 zone. Reactions could push prices back till about the Rs 1,090-1,100 range. Keep a stop at Rs 1,160 and go short. Book partial profit at Rs 1,120 where there is some support and clear the position at Rs 1,100. TATA STEEL Current Price: Rs 225 Target Price: Rs 245 The stock has moved up on fairly high volumes and the uptrend is in line with other iron and steel stocks. Tata Steel may have a target in the range of Rs 245. Keep a stop at Rs 215 and go long. If it does drop below Rs 210, it is liable to fall till the Rs 190 level. Source : business-standard