Britannia: Book profit on uptrend

B. Krishnakumar

As expected, the stock market sentiment was distinctly weak in the previous settlement.

In tune with expectations, the Sensex bounced back from the projected support zone of 4400-4500.

The Sensex has, in fact, recovered smartly after hitting a bottom at the 50 per cent retracement of the rally from 2741 to 6150 points.

The sharp bounce-back on Thursday, off the key Fibonacci retracement level, coincides with the time period for the completion of a short-term cycle. A short-term uptrend is likely to materialise in the ensuing settlement which could take the Sensex to the target zone of 5150-5300.

Given that the evidence of an intermediate trend reversal is still not in sight, the price rally ought to be viewed as an exit opportunity. From a small investor's standpoint, a move past the 5000-mark should be used as an opportunity to cut exposures in equity, especially in the new economy stocks.

Given the expectation of a short-term uptrend, traders could contemplate long positions in the new economy stocks. However, all positions would require a very close stop-loss protection on account of the rising volatility.

Last week's sell recommendation for Zee Telefilms, NIIT and Sterlite Industries was followed by a decline in the price of these stocks. Both Zee and Sterlite saw a sharp decline while the magnitude of the fall in NIIT was relatively muted. Price rallies should be used to cut exposures as the trend continues to remain weak in these stocks.

The focus this week is on Satyam Computer, Wipro and

Britannia Industries. The short-term outlook for all the three stocks has turned positive. Long positions with a tight stop-loss may be contemplated in Satyam and Wipro while existing holders of Britannia could book profit on price rally.

The Satyam Computer stock (Rs. 3,340) is on the verge of completing a short-term cycle. Existing shareholders may remain invested as the scrip could embark on a rally once the current cycle bottoms out in the next couple of days.

Fresh long positions could also be contemplated with a very tight stop-loss in place. On the upside, the scrip faces resistance at around the Rs. 4,200-4,500 range.

Similar to Satyam, Wipro (Rs. 4,216) too appears to be on the verge of completing a short-term cycle. Existing shareholders could trim exposures once the new short term cycle hits the peak at the Rs. 5,200-5,500 range. Fresh long positions may also be contemplated with a close stop-loss by aggressive short-term traders.

In the case of Britannia Industries, the stock is on the verge of hitting an intermediate cycle top. Given that the short-term cycle has already bottomed out, the ensuing rally would push the scrip to the peak of the intermediate cycle top.

As a result, the stock would see a rather subdued trend after the ensuing short-term rally. Existing holders could therefore cut exposures in the stock on price uptrend.

(Note: Recommendations in this column are based entirely on technical analysis of the past price behaviour of the scrip concerned. There is a risk of loss in trading.)