Bearish triple top at 5,180The market trended through a narrow range during most of the week and touched a new 2009 high before sliding on Friday. The Nifty hit a high of 5,182 before dropping to close at 5,117 points for a nominal 0.2 per cent week-on-week gain.
The Sensex was also practically unchanged at 17,119 points. The Defty lost 0.5 per cent as the rupee slid.
Breadth signals were poor. Declines slightly outnumbered advances and volumes were low. FIIs were moderate buyers while domestic institutions were moderate sellers. The BSE-500 lost marginal ground and so did the BSE-Midcaps. The BankNifty and Nifty Junior lost more than the overall market while the CNXIT gained.
Outlook: The market is in a short-term downtrend and it should find support between 5,000 and 5,050 in the next couple of sessions. Most likely, it will range trade between 5,000 and 5,180. Volumes and carryover patterns are bearish but the intermediate trend still appears to be up.
Rationale: There is heavy resistance at 5,180- the market has hit that level thrice since late October and turned South each time. The intermediate trend should be up since we have seen higher lows followed by multiple-tops at 5,180. The double top of the past two peaks has bearish short-term implications. On the downside, the intermediate trend would remain bullish or neutral if the market stays above 4,806 (last low).
Counter-view: Low volumes are always a sign of lack of demand and often translate into bearishness. The next two-three weeks are unlikely to see volumes climb since this is year-ending for most FIIs, who will stay clear of the market. So, a deeper correction that shades into an intermediate downtrend is possible with 4,806 being a key pivot. On the upside, a breakout past 5,180 and close above that point would be positive but unlikely without volume expansion.
Bulls and Bears: The reaction on Friday saw selloffs in banking and real estate and other interest rate-sensitive stocks. The BankNifty lost 1.6 per cent over the week with other finance sector stocks dropping as well. PSU banks got hit harder than private sector banks. The CNXIT gained around 1.6 per cent, which was an outperformance compared to wider indices but it saw corrections by the weekend.
Engineering majors like BHEL, Greaves and ABB looked strong. So did a couple of auto sector companies like Bajaj and Bharat Forge. Cement shares looked to have the potential to buck a possible downtrend with Grasim and ACC both doing well. Sail and Jindal Steel & Power were other gainers against the trend on Friday. Quite a few big guns like HUL, Reliance Industries and L&T held their ground.
MICRO TECHNICALS
BAJAJ AUTO
Current price: Rs 1,725
Target price: Rs 1,765
The stock has hit a new high on very good volumes. It is in a new zone so target projection will have a high error factor. However, the pattern suggests that Rs 1,765 is a reasonable target. Keep a stop at Rs 1,710 and go long. Be prepared for high volatility.
THERMAX
Current price: Rs 579.75
Target price: Rs 550
The stock has broken a key support and it could continue to travel down until it hits good support in the Rs 550-555 region. Keep a stop at Rs 590 and go short. Partially cover at Rs 560. Start clearing the rest of the position between Rs 550 and Rs 555.
BERGER PAINTS
Current price: Rs 63.5
Target price: Rs 72
The stock has seen sharp volume expansion and it has completed a bullish pattern. It faces some resistance at Rs 66 but it has a target projection of about Rs 72. Keep a stop at Rs 61 and go long. Add to the position above Rs 66 and clear the position above Rs 71.
ORIENTAL BANK OF COMMERCE
Current price: Rs 264.5
Target price: Rs 245
The stock broke a key support on high volumes. It is likely to drop till around the Rs 245 level if the pattern projections are fulfilled. Keep a stop at Rs 270 and short. Partially cover at Rs 255 and hold the rest of the position with a stop loss at Rs 260.
UNITECH
Current price: Rs 86.65
Target price: Rs 75
The stock has seen the start of a correction in the last two sessions. It is poised on an important support. If it falls below Rs 84, it could slide till around Rs 75. Keep a stop at Rs 89 and short. Increase the position below Rs 85. Start booking profits below Rs 77.
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F&O OUTLOOK: Breakout may swing both ways
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