Investors may find a considerable amount of value in these stocks. The good news of the week was that the government has stood by its decision to allow 40 per cent stake in the proposed insurance bill. This is probably the first time that the prime minister has refused to succumb to pressures from different factions of his party. It is also likely that the Congress will support this bill. The chance that the bill is likely to scrape through is now a possibility. The biggest beneficiary of the bill is obviously going to be the consumer who will benefit from the increased competition. If the insurance bill does get cleared, it is likely that the market will be on steroids.

Last week, we felt that the market was likely to stage a rally. It was mentioned that the index faces resistance at around 2,922 points and once it crosses this level it is likely to reach the level of 3,027 points. In a very strong move that followed, the index had scant regard for the resistance level of 2,922 points and continued unhindered marginally below its next progressive level of 3,027 points.

On the weekly charts (not shown here) the current week's trading has again formed a very strong candle. This pattern confirms the `piercing pattern' formed during the previous week. On the weekly charts we thus have a very bullish confluence of candlesticks. On the daily charts the movements of the index have been interesting in the last three days. In the first two trading days the index showed very two strong trading sessions. After this, on Wednesday's trading day the index formed a shooting star.

This was again followed by another small bodied candle. Friday's trading resulted in a `doji'. The appearance of the `doji' is again very important from the point of view of its positioning. Notice in the charts that the `doji' has occurred just below the trendline. The trendline has been drawn from joining the July 17 high of 3,525 points to the September 25 high of 3,266 points. Also, the `doji' is marginally below the resistance level of 3,027 points.

Ordinarily, the appearance of the `doji' at such a crucial level would have been bearish as it would be a sure shot reversal pattern. But the current situation is different. The candles prior to the `doji' have been small bodied candles which have followed a long candle. In such a situation we could have a candlestick pattern known as `high price gapping play'. This is a continuation pattern.

Thus, we are at a loss to judge how the market will act in the forthcoming week. Much will depend on how the market performs on Monday. The strategy for the week would be to wait and see how the market opens on Monday. If in the early hours the index opens with a gap and/or manages to clear the resistance level of 3,027 points, we can expect a rally to around 3,084 points. But if the index fails to cross 3,027 points and starts to decline then we could see a decline to around 2,944 points.

For investors, the dip could imply an opportunity to buy at lower levels and a small dip would not matter much. Short-term traders may consider buying long once the index crosses the resistance level of 3,027 points. If 3,027 fails to hold they could consider selling short. The indicators suggest that the market is showing signs of strength. The MACD (moving averages convergence divergence) is in a buy mode. The 12-day ROC (rate of change) is also showing signs of strength as it is above its equilibrium level. In the final analysis a lot depends on the behaviour of the index on Monday. Traders are warned to be careful in a somewhat undecided market.

LML: Buy on breakout

This stock has formed a reversal pattern known as a `rounding bottom'. The weekly MACD is in a buy mode. Also, notice in the chart that the volumes have started picking up. The stock faces a very strong resistance level at around Rs 66.50. Once this level is surpassed the stock can rise to around Rs 77.50 and beyond this level the next level is at Rs 108. One may buy this stock on breakout. Keep a stop loss below Rs 63.50.

Tisco: Buy at current levels

The stock price has shown a breakout beyond it very strong resistance level of Rs 99. The breakout was accompanied by heavy increase in volumes. Also, this breakout is from an inverse head and shoulder pattern. This itself is a major reversal sign. The medium-term target for the stock is at Rs 118 and beyond this the stock could rise to around Rs 134. One may consider buying this stock at current levels. Keep stop loss below Rs 98.

Dabur: Good potential

This one was recommended by us earlier in this column. On Friday, the stock broke above the resistance level of Rs 390.75. The breakout was accompanied by a heavy increase in volumes. The stock faces resistance at around Rs 450 and beyond this the stock can rise to around Rs 500. One may buy. Keep a stop loss below the level of Rs 385.

Traders choice

Colgate: Go long

One may buy for a targeted price of Rs 197 and beyond this for a targeted price of Rs 203. Keep a stop loss below Rs 185.

Bajaj Auto: Sell short

The stock has broken below Rs 514. One may sell short for a target of Rs 499. Keep a stop loss above Rs 614.