Furthermore, with the budget round the corner most major players are out of the market as they are actually awaiting the actual budget announcements before adopting future course of action. Politically the main villain of peace this time was the rumour that the TDP was considering withdrawal of support to the BJP government.

Though this was not true at all, it does go to show how fickle is the strength in the rally and the sensitivity of the market to the developing politics. The market is just not willing to expect any damage to the ruling party as it seeks stability at the centre. Any development which has a semblance of causing damage to the stability at the centre, the market is sure to react to it adversely. Last week we had anticipated that the market is expected to decline.

The U-turn in our opinion on the market helped us in avoiding getting caught on the wrong foot. Last week we expected that the index could see a decline to 3197 once it broke through the support of 3270 points. Well the index did decline rather sharply and on Friday the made a low of points. Very close to our support level of 3197 points.

The index is showing some very interesting tendencies and it could give us insight into how the market is likely to function. Since the top of 3515 points the index in around three weeks of trading has shown a tendency to move in a triangle. Now a near horizontal line can be drawn at around the level of 3200 points.

Thus the index is possibly forming a declining triangle. This pattern is regarded as a continuation pattern or a reversal pattern depending on the side the breakout. In this case if the index breaks below the low of 3197 points we can expect a further decline. But in the breakout is on the up side we can expect continuation of the rally. On Friday the index came extremely close to the support level of 3197 points and has stayed marginally above it. Now the question is whether the index will break through the support level or not? To answer this question let us see what the price action of the week has to offer.

This week Tuesday's trading formed a star which was followed by a hammer. On Thursday the trading was a long black candle which was again followed by a small bodied candle. The point to note is that in spite of all the bearishness the index did not go below the support level of 3197. Thus we believe that there is a chance that the index will stay above the support of 3197.

But if the price action shows that the index has broken below 3197 points we accept the verdict of market and expect the index will decline to around 3095 points. But if the index reverses and shows a breakout above 3333 points we expect the index to rally further. The market behaviour till the end of the week tells only half the story and we have to wait further market action to give a confirmation of the price behaviour.

The supporting indicators offer little scope for analysis as the market was mostly sideways. The MACD (Moving Averages Convergence Divergence) is still in a sell mode. The 12-ROC (Rate Of change) is below its equilibrium level and seems to be lost for direction. The 14-day RSI (Relative Strength Index) is also lost for direction. We do not have many options open. The future course of market behaviour depends whether the index breaks below the support level of 3197 or not. The best option for traders is to adopt a watch and wait attitude and act only when the index gives a clear signals.

Tisco: In spite of all the bearishness in the market the stock price has not shown a heavy decline in price. The price is taking support at the rising trendline and it does have a potential to rally to around Rs 175 over the long term. One may consider buying the stock at current levels. One may buy this stock at current prices with a stop loss below Rs 108.

Thomas Cook: The volumes in this stock have picked up lately. Currently the price of this stock is marginally below the resistance level Rs 750. On breakout the price faces a brief resistance around Rs 810. Beyond this the price can rally to around Rs 1000. One may buy the stock once it breaks above Rs 750 for a targeted price of Rs 1000. Keep a stop loss below Rs 725.

Flat Products: Steel sector seems to be staging a revival. The stock is just on the verge of breaking out beyond Rs 46 a resistance level. Investors may buy on break above the level of Rs 46 for a target of Rs 85. Keep a stop loss below Rs 42.

Traders Choice

State Bank: Buy Long

The price of this stock has been moving up after making a low of Rs 150 since a long time now. The price has again come to this level. One may buy this stock at current levels with a stop loss below Rs 148.

Telco: Sell short

The price of this stock is expected to decline to around Rs 177.5. One may sell short. Keep a stop loss above Rs 191.