STOCK TO TRADE 24 03 2011

• Bhushan Steel :- NR7 pattern in Bhushan Steel. Buy above 441, Sell below 433.
• Jet Airways :- Overbought TA Insync in Jet Airways. Sell with stop loss above 450.

Nifty rally continues, still in range

Yesterday, Tuesday, was an NR7 day. Today, the Nifty opened steady, then moved up throughout the day to close at the top of the day’s range. The message is: After an NR7 day, a trending moev can be expected. With today’s gains, the Nifty stands at 5480. This is within the original 5400 – 5600 range. We did see a pivot high at 5535 which means that the Index could now face resistance around 5535. Earlier we had a pattern of lower lows when the Nifty came down to 5348 just two days ago. If the Index closes above 5535 then we have a pattern of higher highs. This has not yet taken place, which means we are simply discussing what could come about if the Nifty rally continues.

Markets are certainly in some kind of a no trade zone. There are day trades on both sides – long and short. But, taking a position is not rewarding inside a trading zone. However, the Nifty did breakdown below 5400 and closed below this number for two days. Therefore, we have to take a bearish bias for the markets. Trading then is to be on the short side, with a stop above 5535. Remember that this is the cash nifty, not futures.

STOCK TO WATCH

BGR ENERGY
Present Price – Rs.470.95, Projected Price – Rs.510-515

BGR Energy (BGR) conducts its business under two main segments, turnkey engineering projects (TEP) and equipment & systems. Besides engineering and technology skill sets, EPC and BoP contracts tend to be project management intensive.
The company enjoys a huge order book of Rs.11000 cr plus. The company’s order backlog is likely to provide revenue visibility for ~4 years, second only to Bharat Heavy Electricals (BHEL) in the capital goods sector. Superior project management skills, which BGR has garnered over the past few years by executing complex EPC and BoP projects (130 contracts in India and abroad), provides comfort on the execution. Over the next 2-3 years there is likely to be strong revenue/earnings visibility for BGR and it is likely to emerge as one of the leading full service BoP contractors.

On the technical front, the stock has gone up today and formed a Long White Candle that too with impressive volume expansion which is a strong sign that bulls are back in this counter. We expect the stock to reach a minimum target of Rs.510. The time frame of the investment would be around 10-12 trading sessions.

DERIVATIVE PICK

• ICICI BANK (CASH – Rs.1040.30) : The stock has shown a lot of resilience on days when the market is in a bearish mode. The stock has formed a long White Candle on strong volume expansion. Buying is advised above Rs.1045 for a target of Rs.1058 and Rs.1072. Higher target of Rs.1086-88 is also possible. Stop Loss of Rs.1024 should be kept.

• PNB (CASH – Rs.1110.35) : The stock after a long consolidation between Rs.1040 and Rs.1113 is now ready for an upward breakout. Buying is advised above Rs.1115 for a target of Rs.1127 and Rs.1139. Higher target of Rs.1144-1148 is also possible. Stop Loss of Rs.999 should be kept.

Market Outlook for 24 03 2011

Markets opened with a slight negative bias in line with the other Asian markets but gained momentum as the day progressed. Early in the session Nifty moved above 5425 and remained above that for the remaining part of the session. It was a combined strength of many heavyweights that propelled Nifty to higher levels. So, we had positive momentum in RIL, Bharti, SBI, ICICI Bank, IDFC and Bhel that sustained throughout the session. Bank Nifty gained around 1.7% and even the Realty counters had a positive day. But the main activity was confined to some mid cap stocks like HOEC, DCHL, Tata Comm and BGR Energy. Some other prominent gainers were IB Real, Pantaloon, MLL, Sesa Goa, Cipla,Hexaware, Indusind Bank, Havells, JP Associates, PFC, Orchid and REC. Few stocks did witness some selling and prominent amongst these were Escorts, TV18, NCC, ZEE, Jet Airways, HPCL and Neyvelli. Volumes were better particularly in the top gaining counters. As suggested yesterday Nifty did move up steadily once it was above the immediate resistance at 5425 and closed almost at the highest point of the day. This suggests that the 5350-75 support has held for now and we are once again in the sideways range between 5375 and 5570. Bank Nifty has once again led the way and it is approaching breakout level of 11200 again. Bank Nifty has seen strong base building/consolidation for past 10 weeks now and a sustained breakout beyond 11200 could mean another 10-12% up move. ICICI bank closed just around 1040 and followup buying could see it move to around 1075-1080. Indusind Bank is looking good and seem to have formed a decent base. Stock could be headed towards 275-280. BGR energy is another counter that is showing positive intent and has once again moved past 465. Stock could target Rs 510 if it manages to stay above 450. Gail, Petronet and DLF are also looking good for decent gains over next 5-7 trading sessions. Nifty would find decent support around 5415-25 now and then around 5375while 5530-5550 should provide resistance as of now.