Ahead of the earnings season - Market finds strong support.

The Quarterly results are up tomorrow starting with Infosys being the first one to declare. The overall outlook for the earnings is positive and strong revenue growth is expected. The margins are expected to shrink due to increasing raw material costs and commodity prices. 

Caution is to be taken not to jump in the buying process when companies declare solid results. If one looks at the current run-up in the markets, it could be possible that the earnings have already been factored into the prices. Most of the mid-caps have shown a good rally. Also many large-caps in the IT sector have given good upsides. One can get stuck up on the wrong side of the market due to the 'Buy on rumour-Sell on news' phenomenon. 

Technically, as expected the Sensex found a good support level at the 200 DMA (19050 levels) and has bounced back strongly yesterday with a 434 point rise. 

The real test lies at the 19858 levels where multiple resistances lie. 

An analysis of the rise since Feb 2010 to Nov 2010 high shows that the markets face a crucial Fibonacci Retracement at 19858. Also at these levels, the markets had formed multiple bottoms during Oct 10.

Finally the downward sloping trendline makes this level very crucial to cross.

On the upside, crossing this levels on a closing basis would see increased momentum and some short covering. 

On the downside, the first support lies at 19350. If the markets cross this, the next support will lie at 19050 which is likely to be strong enough to hold. The markets are showing highly overbought levels which is technically a concern factor.

From the individual stock perspective, most of the banking sector stocks have find good support at their 200 DMA prices which is a bullish indication for this sector. The auto stocks had also shown renewed buying interest yesterday when the markets snapped the 5 day losing streak.

ITC which was recommended earlier is likely to achieve the target of 195. 

HUL can make a quick move to 305-307 levels if sustained above 288. The specifics are shown in the chart

Sutlej Textile and Industries Ltd is another good contender for an upside.

The Symmetrical triangle breakout, crossover of the 200 DMA, strong RSI & Stochs movement all point towards a breakout.

Caution: The stock is thinly traded, so strict stops are to be followed.