The IT stocks were the worse performers during the week. Some of the mosttop names in the software industry were battered. The selling was unabatedas the prices dropped as if there was no to-morrow. If the rise in thesoftware stocks was spectacular the fall was faster and more drastic.

The rise in the US markets and more particularly at NASDAQ failed to cheerup the sentiments if the Indian bourses. Another factor, which influencedthe selling, was the tremendous redemption pressure on the mutual funds. Thefund managers had no option but to see any thing and every thing lock stockand barrel. Another notable aspect of the fall in the market was that goodresults and good news did not have a favourable impact on the prices.

Infosys , Satyam etc have all come out with excellent results. But themarket has failed to take notice of them. Any market condition that does notrespond with rallying prices when accompanied by good news should be watchedcarefully.

Last week we were of the opinion that the market should decline to around4600 points if there is a break below 4943 points. The index declined belowthe low 4943 and continued a non stop slide to around 4431 points.The last phase of the decline was heavy, as there was nothing to stop theflow of heavy selling. But behind the dark cloud there is always a silverlining. The index has formed two back to back bullish patterns that could bea reversal patterns.

The first one was the 'Last Engulfing Pattern' that was formed on Monday andTuesday. Notice in the chart how the black candle on Tuesday has 'engulfed'the previous days candle. Also the second one was the bullish counter attackline. Also the index has held the low of 4605 points. Now if one observeson the weekly charts notice that a 50 per cent retracement of the entiremove from 2741 points to 6152 points works out to around 4446 points.

The low of Thursday was at 4431 points. Just off by 15 points !!!. Thus wehave a series of bullish patterns that have occurred at a very importantlevel. The market could see a rally to around 5140 points within next coupleof weeks once the high of 4700 is cleared. In the event the index breaksbelow the level of 4600 points then we have to consider bullish opinionsabout the market.

The oscillators have for the first time given out a positive divergence butas the market was extremely fast we have to use a shorter term 8-day RSI(Relative Strength Index) to see the positive divergence. Here thedivergence is seen clearly. The MACD (Moving Averages ConvergenceDivergence) is still in the sell mode. The over all market appears to bebullish and there is a good chance that there could be a rally in themarket.

The three recommendations given below have all formed very similar patterns.That is testing of previous bottoms. All these offer very attractive riskreward ratios.

Infosys Technologies:
The price of this stock looks attractive for investment at current levels.The price has successfully tested its previous week's bottom and it couldpossibly be forming a double bottom. In the short term the price may see arally to around Rs 10625 and if there is a break above the level of Rs 10625then the price may see a rally to higher levels. One may consider buyingthis stock at current levels. Keep a stop loss below Rs 6651.

Satyam:
The price of the stock may see a rally to around Rs 4509 in the intermediateterm. The price should be forming an intermediate term double bottom. If theprice manages to break above the level of Rs 4480 there could be a rally tohigher levels. The priceoffers a very good down side risk at current levels.One may consider buying at current levels with stop loss below Rs 3164.

Reliance Capital:
The price of this stock has also tested the previous bottoms and it may alsobe in the process of testing its previous bottom. The price may see a rallyto around Rs 167in the shorter term. In the event the price breaks above thelevel of Rs 167 there could be a further rally in the price. One may buy thestock with a stop below rs 114.

BSES:
The price of the stock may rally to around Rs 266 in the short term. Tradersmay buy the stock at current levels for a decent increase in price. Thereseems to have been a lot of accumulation going on in this stock at currentlevels in the past three days. One may buy the stock at current levels. Witha stop loss below Rs 227.

Aptech:
The price of the stock could decline to around Rs 1846 if it breaks below Rs1975. One may sell short if the price breaks below Rs 1975 and place a stoploss above R 2132.

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