Weekly Technicals

The pattern of three successive lower tops since June 4 suggests that the market has entered an intermediate downtrend.

The market eased through several sessions of consolidation at lower levels followed by an abortive breakout on Friday. The Nifty closed at 4171 points for a nominal gain of 0.64 per cent. The Sensex was up 0.7 per cent at 14063 points. The Defty moved up by 0.8 per cent as the rupee continued to strengthen.

Breadth was almost balanced by the weekend while volumes were low through the week. FIIs and Mutual funds showed divergent trading patterns through the first four sessions of the week. The FIIs were net buyers while the mutual funds were net sellers. The Broad BSE 500 did gain 0.83 per cent.

Outlook: The Nifty found support several times at around the 4100 mark. It failed to beat resistance at 4175. Next week could see range-trading inside this same zone. Or, there may be a dip till the next support at 4050.

The signals don't suggest an upside breakout. In fact, the pattern of three successive lower tops since June 4 suggests that the market has entered an intermediate downtrend.

Rationale: ifty 4100 appears to be a pretty good support. But the market will need to generate much higher volumes to burst through the selling pressure at 4170-plus.

This didn't happen this week due to liquidity being sucked off by DLF's IPO and it's unlikely to happen next week if only because of ICICI's FPO. On the downside, the secondary support at 4050 seems strong. But if that is broken, a dip till 3850 is on the cards.

Counter-view: Sentiment may just improve given the qualified success of the DLF IPO. If it does, the requisite volumes could be generated to create an upside breakout. Even then, the market will face continuous selling pressure above 4200.

Bulls & Bears: At the stock-specific level, the bearish impression is reinforced. Most stocks across the F&O universe are in range-trading mode. A few are bearish. However there are some lower-weighted stocks that seem capable of moving up despite the generally indecisive or bearish mood. Our picks for the week are all chosen from these non-correlated scrips.

In terms of sectors, some smaller banks such as Corporation Bank, Syndicate Bank, UTI Bank Union and Vijaya Bank are mildly bullish. There's also a little bullish action in Bhel, Suzlon Energy and Tata Power.

Apart from these sector-specific moves, isolated gainers such as Divis Lab, GMR Infrastructure, Maruti, Reliance Capital, Titan, Nicholas and TVS are visible. This is not enough to pull the market up given the number of range-trading pivotal stocks.

MICRO TECHNICALS

UTI Bank Current Price: 599.75 Target Price: NA

The stock has made a breakout but this hasn't been backed by a volume expansion. The chart formation suggests that a target of 640 is possible and a projection made off weekly charts would lead to a target of 700 in the timeframe of 3 months. However the lack of volumes should be a danger signal. Keep a stop at 595 and go long.

Educomp Current Price: 1896.55 Target Price: 1940

The stock surged on Friday with a sharp volume expansion. It is going to test resistance at 1940 so that is a minimum upside target. If it managesto close above 1940, there will be a target projection of 2150. Keep a stop at 1885 and go long.

GMR Infrastructure Current Price: 564.15 Target Price: 540

The stock continues to rise with support on a 45 degree trendline which it has managed to maintain since early April when it came off a low of 327. It's impossible to project a target with this formation except by trendline extension. Keep a trailing stop at 540, go long. Move the stop up 10 points for every 10 point advance.

Nicholas Current Price: 301.5 Target Price: 325

The stock jumped on Thursday, closing at 306.5 with a volume expansion. There was a lot of profit booking on Friday but that caused only a minor pullback. There is an upside till 325. Keep a stop at 290 and go long. It may be worth holding a reduced position even above 325 because the major trend has changed.

Suzlon Energy Current Price: 1387 Target Price: 1475

The stock is testing resistance at current closing levels and slightly above. If it closes above 1405, it will complete a formation with a likely target of 1475-80 and a potential target of 1515.