+ve Sector, Scripts : JKTyre, Nirma, Castrol
Intraday Calls
BUY Infy-1509 for a target 1540 stop loss 1395
BUY ICICI-479 for a target 495-500 stop loss 465
BUY RIL-1806 for a target 1875 stop loss 1780
Breakout Calls
BUY HeroHonda-1182 for a target 1230, 1248 stop loss 1170
Expected Breakout Calls
BUY ONGC-864 above 870 for a target 904 stop loss 860
Positional Calls
BUY Titan-746 for a target 790-800 stop loss 730
BUY TCS-623 for a target 666-670 stop loss 610
Rally may continue up to 3506 level for time being.
Short-Term Investors:
Bearish Trend. 3 closes below 3530 level, it can tumble up to 3173 level by non-stop.
BSE SENSEX
Higher opening expected & uptrend should continue.
Short-Term Investors:
Short-Term trend is Bullish and target at around 11967 level on upper side.
 | 3473.95 | ( 3.32 %) | 111.60 |  |
| 1 | 2 | 3 | ||
| Resistance | 3518.00 | 3562.05 | 3637.70 | |
| Support | 3398.30 | 3322.65 | 3278.60 | |
 | 11403.25 | ( 3.65 %) | 401.50 | | |
| 1 | 2 | 3 | |||
| Resistance | 11525.15 | 11647.04 | 11863.84 | ||
| Support | 11186.46 | 10969.66 | 10847.77 | ||
CAPITAL GOODS Stocks May Zoom
It has been a stunning performance by Sensex in the month of April closing with 17 per cent gain. BSE Midcap and Smallcap indices kept pace with 18 and 21 per cent gain respectively. Trading was extremely volatile last week on long and short unwinding exerting pressure in both directions. Breadth was, however, weak as the action was concentrated mainly in the large-cap stocks. Volumes went through the roof, especially in the derivative segment of NSE. FIIs were net buyers for the week.
There is a slackening in the momentum indicators in the daily charts. Ten-day rate of change oscillator is perched on the zero line and the 14-day relative strength is moving down from the overbought zone. Weekly oscillators are however gung-ho. The 14-week RSI is rising at 62. The implication is that though there can be volatility in the short-term, the medium-term outlook is positive.
The three-day week just gone by has not changed our outlook along any time-frame. Sensex is moving in a narrow trading range over the short-term. Interpreting such sideway moves is tricky since though they are mostly continuation patterns followed by resumption of the up-trend, in rare cases, such moves turn out to be the last part of a up-trend called terminal corrective or a rounding top. The correct labelling becomes apparent only on completion of these patterns.
The safe way to play such patterns is to stay with the trend; that is to buy in declines until the index gives clear indication that is has reversed by declining below certain levels. Short-term investors can stay invested as long as Sensex holds above 10650. The trend-deciding level for medium-term investors would be 10200. Immediate medium term resistance band is between 11600 and 11800.
The all-pervading scepticism about the sustainability of the current rally appears to be aiding the Sensex to cover more ground. There can be a move higher to 11547 or 11687 next week. Strong move beyond the second resistance would take it to 12136. Supports for the week would be at 10700, 10440 and 10230.
Medium term view for Nifty stays positive and a close below 3170 is required to signal a medium-term trend reversal.
Reliance Industries 
It was a one-day-up-one-day-down kind of a move in RIL last week. The short-term trend in the stock is sideways between Rs 1,670 and Rs 1,850. Though the stock could test the upper boundary of this range in the short-term, presence of strong medium term resistance between Rs 1,800 and Rs 1,850 can cause another reversal from there. Break-out above this resistance will give the next medium-term resistance of Rs 2,100.
Negative divergence in the daily momentum indicators implies that the stock could decline in the short-term. Fresh long positions are therefore advised only on a strong close above Rs 1,850. Key short-term support is at Rs 1,600 where the 200-day moving average is positioned.
Maruti stayed volatile in the range between Rs 770 and Rs 820 last week. As explained in our last column, the short-term trend in this stock is weak. Key short-term resistance for the stock is at Rs 826. Failure to rally above this level can result in the stock declining to Rs 740. The presence of the 50-day simple moving average at Rs 725 makes the zone between Rs 725 and Rs 740 a key short-term support. Target on a decline below Rs 725 is Rs 694.
The medium-term trend in Maruti continues to be up and a weekly close below Rs 725 is required to negate this view. However, investors ought to tread carefully since the stock is nearing key intermediate term resistances of Rs 870 and Rs 950.
SBI 
It was yet another star formation in the weekly candlestick chart of SBI signalling indecision. This stock is moving in the range between Rs 1,200 and Rs 1,350 over the short-term. Short-term traders can buy in declines as long as it holds above Rs 1,200. Decline below Rs 1,200 can take the stock to Rs 1,120. Though oscillators in the daily chart continue to signal a buy implying that the medium term trend continues to be up though there can be short-term weakness.
If SBI holds above Rs 1,200, there can be another spurt higher to Rs 1,450 over the medium-term. This is a key medium-term resistance since it occurs at 38.2 per cent retracement of the down-move from the January 2008 peak.
ONGC too is struggling to surpass the key resistance at Rs 920. We continue to advise caution since a reversal from this level can cause a correction back to Rs 600 over the medium-term resulting in a sideways move between Rs 600 and Rs 900 for a few more months. But a weekly close above this level can take the stock to Rs 1,100. Fresh purchases are therefore recommended only on a break-out beyond Rs 920. The short-term trend in the stock is down. Key short-term resistance is at Rs 886. Failure to move beyond this level can cause the stock to decline to Rs 826 or Rs 812 again. 200-day simple moving average present in this region will be an important short-term support for this stock.
Nifty futures at a critical juncture
The three-day trading week saw Nifty future end on a flat note as Wednesday's smart recovery ensured that previous two sessions losses were recouped.
The Nifty April future closed about 3474 points against its previous week's closing of 3482. Nifty May future closed a tad higher at about 3483 points.
The series also saw a slightly higher rollover of 74 per cent. The market-wide rollover, however, was about 70 per cent, way below its performance in the earlier expiry.
Quite a few stock futures did not active rollover like last month. Expulsion of 50 stocks from the F&O list and the uncertainty related to election outcomes could be attributed to the poor show. Stock futures in telecom, auto and IT sectors however reported strong rollovers.
Follow-up
We had advised traders to set short straddle using 3400-strike. The position ended on positive note.
Outlook
We continue to feel that 3515-25 level offers a strong resistance zone for Nifty future. But if the Nifty futures manage to close above the 3525 barrier convincingly, then it has the potential to reach 3660, which is also its next resistance zone.
Any move above 3660 can take it higher up to 3850 level.
On the other hand, if it turns weak, then Nifty futures has the potential to touch 3000-2950, though in between it finds support at 3225.
Traders may note that the month of May traditionally has always witnessed wild swings, particularly on the downside.
Option monitor
Traders appear to be divided over the market direction. While 3400-3800 range call options remained active during the week, puts witnessed activity in the range between 3000-3500.
This indicates that one set of traders expect Nifty to fall to 3000, while another hopes that it might touch 3800.
Volatility Index
Volatility index, which measures the immediate expected volatility, weakened slightly this week. It ended at 46.63 as compared with its previous week's close of 47.78.
The fall however was mainly due to the expiry of April contracts, as some traders did not roll over their put positions.
Recommendation
Traders can consider setting a long straddle using 3500-strike.
The May 3500 call ended at Rs 160 while the put closed at Rs 176.15. This strategy is slightly for longer period.
Long straddle options yield unlimited profit with limited risk as the maximum loss is limited to the premium paid.
This strategy is best suited if one expects wild swings in the underlying asset but is unsure of direction.
FII trend
The cumulative FII positions as a percentage of the total gross market position on the derivative segment as on April 29 jumped to 43.29 per cent.
They resorted to heavy selling, particularly in index futures.
They now hold index futures worth Rs 11,597.73 crore (Rs 13,286.71 crore) and stock futures Rs 14,534.88 crore (Rs 18,447.89 crore).
They reduced index options holding significantly to Rs 22,771.88 crore (Rs 34,658.94 crore).
FII DATA
| FII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores) | ||||
| Category | Date | Buy Value | Sell Value | Net Value |
| FII | 29-Apr-2009 | 2853.31 | 2488.08 | +365.23 |
| DII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores) | ||||
| Category | Date | Buy Value | Sell Value | Net Value |
| DII | 29-Apr-2009 | 1124.76 | 1528.75 | -403.99 |
Meeting line and separating line
Meeting line and separating line candlestick patterns seem to be related patterns, but they are not. Meeting line is a reversal pattern while separating line is a continuation pattern. The similarity is that both these are two-candle patterns
Meeting lines are formed when white and black candlesticks have the same closing price.
Meeting line is similar to the piercing line candlestick pattern, but meeting line pattern is not that significant as the counter move is relatively weaker in the meeting line pattern, because of which the second candle does not pierce the first candle's body.
Bullish meeting line
Following a black candlestick in a downtrend, the stock opens sharply lower with a downward gap and then moves up to close at the same level as the previous day's close. This reflects that there is a balance between the bulls and the bears. A confirmation on the third day is essential in the form a white candlestick with a large gap up or a higher close on the subsequent session.
Bearish meeting line
In an uptrend following a white candle, the stock opens sharply higher with an upward gap and then declines to end the day at the same level as the previous day's close. A confirmation on the third day is required in the form a black candlestick, a large gap down or a lower close.
Bullish separating line
This pattern is formed in an uptrend. We observe a long black candle during the first day, then the stock gaps up higher. It opens with an opening price equal to the previous black candle's opening price and closes the day at a higher level, forming a long white body. A confirmation on the third day is essential in the form a white candlestick with a large gap up or a higher close.
Bearish separating line
We notice a white candlestick in a downtrend that is followed by a lower gap when the particular stock opens next day at the opening price equal to the previous day's opening price.
Later, the stock declines further for a lower closing price, forming a black candle. A confirmation on the third day is vital in the form a black candlestick, a large gap down or a lower close.
--
Arvind Parekh
+ 91 98432 32381
