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B. Krishnakumar

EXCEPT on Thursday, the stock market sentiment remained dull during the week. The weak trend in frontline technology stocks such as Infosys Technologies and Satyam Computer played a key role in affecting market sentiment. Old-economy heavy weights such as Hindustan Lever and ITC fared no better.

The weak trend at the American bourses did not help the cause either. As a result, the BSE Sensex closed on a subdued note on four days of the week. On Thursday, there was some buoyancy owing to a firm trend in Infosys and Satyam. The recovery, however, proved to be short-lived with both these stocks tanking on Friday.

Despite the weak trend in frontline stocks, quite a few mid-cap scrips managed to log substantial gains during the recent weeks. The likes of Sesa Goa, Bank of India and Bank of Baroda have managed to seek higher levels over the past few weeks. In the present market scenario, it would be safer to book profit in stocks where investors are already in the money.

Technically, the failure of the Sensex to hold above its 200-day moving average (DMA) is a major negative development. Any upmove would now find resistance from this average whose value is currently placed at 3284. As of now, the near-term trend in the Sensex continues to remain weak.

A close below 3220 would be an additional confirmation of further weakness. Only a close above 3362 would impart some sort of positive sentiment. A close above 3380 would lend further credence to the prospects of a bull market.

The outlook for stocks such as Tata Power, Bank of India, Sesa Goa and Tata Engineering appears positive. The focus this week is on Tata Power. In the case of Tata Power, the scrip appears to be headed towards the Rs135-140 range. Existing holders could remain invested while aggressive traders may also consider fresh buying.

The only caveat is that a close below Rs 125 would negate the positive outlook for Tata Power. All long positions would therefore warrant a stop at around the Rs 125 level.

Recommendation follow-up

The price movement in Tata Tea and McDowell was in line with last week's expectations. The share price of Tata Tea ruled firmed and went closer to the target price of Rs 215-220, mentioned last week. After touching a high of Rs 209.5 on Thursday, the scrip turned weak on Friday.

Going by the recent price structure, it appears that the Tata Tea scrip has upside potential from current levels. Ideally, the scrip could move towards the Rs 240-250 range in the next few weeks. Existing holders (who have a profitable position) could contemplate partial profit-booking while fresh buying may be considered on price declines.

In the case of McDowell, the share price of the company recovered ground after a weak trend in the early part of the week. The scrip still has the potential to move past the immediate high of Rs 55. Existing holders could remain invested with a stop at Rs 48 while fresh buying may be considered on a break above Rs 55.

(Note: Recommendations in this column are based entirely on Technical Analysis using Elliott Wave and Point & Figure theory of the past price behaviour of the scrip concerned. There is a risk of loss in trading.)

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