Scorers of investors must have breathed a sigh of relief considering that the market has revived. Stocks in the software sector have seen a major reversal of fortune and all the lost value has been recovered almost fully. The newly listed stocks in this sector have seen a phenomenal increase in value. This sector does seem to have a huge potential in the medium term. The interest of the investors does not seem to diminish even with such a phenomenal increase in value.

The market players seem to be on a look out for value with a view to make a killing in the shorter term. With the market showing huge volatility there is a chance to make big gains in the short term. A stock hitting more than two upper circuit limits in a matter of week has become a norm rather than an exception. It is quite common to see an appreciation of more than 10 per cent in a matter of three days. At times, the stock price may hit a lower circuit on a day and then rally to hit a higher circuit on the same day.

This is volatility at its extreme. How does one trade in such volatility? The only way to do this is to use strict stop losses and reduce the size of the bet. In other words, reduce look for a larger percentage increase in price rather then making a few bits and pieces profit. A trader has a better chance of survival in this way.

Last week, we had anticipated that the market should rally to around 4750 points once it breaks above the level of 4600 points. The index did rally to higher levels and then it sort of went into a range. Incidentally, the lower end of the range was also 4600 points, the support level. This suggests that the market has a preponderance of buyers at the level of 4600 points. The market began the week with a bang on the day of Muhurat trading.

The movement in the market since has been of extreme sideways movement. Also notice that the appearance of a series of small candles appearing after last Friday's long white candle. This is the `upside tasuki' a bullish candlestick pattern, which suggests that the market is likely to rally to higher levels. The index is likely to rally to around 4910 points once the level of 4750 points is cleared. But for some time, the market is likely to remain in a range of around 4600 points to around 4700 points.

The strategy for the traders should be to consider buying around 4600 odd levels with a target of 4750 points. If the market rallies to higher levels and breaks above Rs 4750 points it may rally to higher levels.

Alternatively, if the market breaks below 4600 points, we may see a decline to around 4470 points. But our bet is on the bullish side. The indicators have flashed a buy signal. The MACD (Moving Averages Convergence Divergence) is in a buy mode. The 14-day RSI (Relative Strength Index is just around its equilibrium level.

India Cements
The price of this stock is just on the verge of breaking out of the resistance level of 106.6. The price of this stock is likely to rally to around Rs 125 in the shorter term and on breakout above Rs 125 the price may rally to around Rs 155. One may consider buying this stock on breakout. Keep a stop loss belw Rs 94.

German Remedies
The price suggests appearance of a small inverse Head and Shoulders pattern. The price is likely to rally to higher levels on break above Rs 1041 points. One may buy the stock on break above Rs 1041 points for a target of Rs 1265 in the medium term. Keep a stop loss below Rs 971.

Escorts
The sideways price action in this stock suggests appearance of a `flag' pattern. The price of this stock does show a potential to rally to Rs 200 oce it shows a break above Rs 165. One may buy on breakout. Keep a stop loss below Rs 155.

Grasim
The price of this stock may see a rally on break above Rs 473. Traders may buy the stock on break above Rs 473. Keep a stop loss below Rs 458.

Sterlite
The price action has formed an ascending triangle. The price of this stock may rally to around Rs 425 on break above Rs 388. One may buy the stock on breakout. Keep a stop loss below Rs 375.

(The Writers e-mail address is at shahmani1@yahoo.com)