Governments in India have a notorious reputation of what changing policies at their own whims and fancies. The country is again going to polls. A vast majority of people would have preferred that the polls be avoided. But there is not much one can do but accept the reality. With the election becoming a certainty, most market participants would have given up hope of a quick marketrecovery. As the things stand out at the moment, the BJP government will continue to act as the caretaker government till the time a new government takes office. Now the question on everyone's mind is that what would happen if the polls do not again throw up a clear majority for any party. It is this factor which is playing on everyone's mind. Last week we were of the opinion that one should adopt a wait and watch attitude for some time. As a trader it is not necessary or required to be entering trades every single trading day. There are going to be times when the market is not showing any clear signs. It is during this period that the trading is best avoided. We only play the game when the odds of winning are successfully in our favour. This way the chance of making profits increase significantly.

During the week the market opened with a gap on the downside and continued to decline. On Wednesday the index, for a first time in last several days saw a major recovery from a low of 3183 points. Wednesday'strading was a hammer, which was followed by a white candle on Thursday. The white candle confirmed the previous day's hammer. It is also interesting to note that Thursday's high was at 3351 points, just marginally below the last Friday's low of 3361 points. Thus the index is below the 'gap that was formed on the open of the current week's trading. As we know gaps show a tendency to act as support and resistance points. But the price action in the last two trading days has been bullish which suggests that this gap may be filled. Also if the price action on the NSE on Friday is any indication, by the gap would probably be filled. In case the index manages to rally above 3361 points it could rally to around 3400 points and above this to around 3483 points. If the index fails to rally above 3400 points then we could see a decline to around 3197 points. If the index breaks below 3197 points it could decline to around 3080 points. We do not expect the index to show a major rally in the foreseeable future.

Butover the next couple of weeks we could see the index giving several moves with average swing size of around 350 points. It is these swings we will seek to identify over next couple of weeks. The indicators have not flashed a buy signal as yet. The MACD (Moving Averages Convergence Divergence) shows a significant decline but it has not given a buy signal. Similarly the 14-day RSI (Relative Strength Index) is well above its oversold levels. The indicators do not signal any significant shift in trend. Traders may expect the market to decline from higher levels.

Atlas Copco: The price of this stock is in a range of around Rs 110 to Rs 166. At current levels the price of the stock offers a reasonably good risk reward ratio. On the upper side the price of the stock can rally to around Rs 166 in the medium term. One may consider buying the stock at current levels for a targeted price of around Rs166. Keep a stop loss below Rs 105.

BSES: This stock is also moving in a range of around Rs 125 to Rs172 since a long time. The price has not seen lows below Rs 125 in a long time. One may consider buying this stock around Rs 125 for a targeted price of Rs 170 in the medium term. One may keep a stop loss below Rs 120.

Lakme: The price has broken out of its consolidation zone between Rs 116 to Rs 97. The stock has also been attracting heavy volumes since couple of months. The price can be expected to rally to around Rs 150 and if the price breaks above Rs 150 it may rally to higher levels. One may buy with a stop loss below Rs 100.

Traders Choice

Colgate Palmolive: The price of this stock is marginally below the resistance level of Rs 192.20. Traders may buy the stock once it shows a break out above Rs 192.20. One may buy on break out with a stop loss below Rs 188. Bajaj Auto: This stock is just above the support level of Rs 515. One may consider this stock at current levels for a target of Rs 538. Keep a stop loss below Rs 515.