Crude sets the tone for market recovery - Stocks and outlook for the week.

The market ended a 9 day losing street last Friday backing on the great fall in crude. Crude, which is one of the most influential commodities for the stock market, fell to the tune of

12-13 % last week which sent the markets into a buying mode from stocks that had descended to low levels due to the correction before.

Further, many commodities like gold, silver, etc which had jumped to historical levels have come down. Copper, Tin, etc in the metals front too have declined considerably.

Markets are in a recovery mode and should continue to do so if crude prices don’t make a flip upwards again. Further downside to crude is very beneficial for India as it is a major part of its imports and shall reduce inflation which India is grappling with.

Technically, the Sensex bounced off the support levels as expected. The indicators are bouncing back from the zone of oversold conditions which is a good sign.

The first resistance is at the 18705 level which if surpassed, should take it all way above 19K levels. Support shall lie at 18180 below which a good potential is there for correction.

On stocks….

The correction has been substantial and Stocks like Hindalco, Tata Motors and Shree Renuka and HUL have hit minor stoplosses albeit minor stops as they were placed below crucial support levels.

Cairn India recommended earlier had made a break below the trendline and hence must be exited at CMP. Same is true for BPCL as the stock has rose substantially on the back of a fuel price increase (and the same may not be true if crude falls further).

Stoploss for Lupin be tightened further to 414.

Add positions on Sun pharma as it again tests the long term DMA support. Tighten the stoploss to 421 for old and new positions.

Individual stocks have done a great correction and have provided good opportunities for bottom fishing. These are some stocks that appear attractive from a technical perspective.

RIL: had written about this one last time. http://thefallingwedge.blogspot.com/2011/05/stock-in-focus-ril.html Price specifics are as follows:

Buy above 970

Target 1040

Stoploss @ 949

Hindustan Zinc Ltd: A stock that has approached the 200 DMA support yet again and can provide a good opportunity.

Tata Steel: 580-585 has been a solid support level since a long time.

Infosys: Another beaten down stock. The Price-MACD divergence makes the stock attractive on the charts.

ITC: Last time ITC had hit it on target. Again it tested the breakout level of 180-182 and has bounced back making a hammer (bullish).

Tata Chemicals: This one too had hit on target last time and is retesting the breakout zone. It should provide a good trade.

SBI: last time SBI had hit a 2.5 % stoploss after recommendation (which was good as the stock tanked 10% post that with all other banks J ).

Again the stock is attractive this level and can be entered into with the tighter stop.

For all the above new stocks:

1.      The prices are in a highly oversold zone.

2.      Targets are set quite modest due to the volatile markets. They will be revised further as needed.

3.      Stoplosses are set quite tight and below crucial supports to exit in time.

In general: The markets here on look very good from a week’s perspective. But any downside would be long too, so keep the stoplosses tighter to exit at early points.