A reduction in the CRR at this stage would not have served anypurpose. The interest rates would have gone down further, in turn affecting the profitability of the banks. Last week we had anticipated that the Sensex would decline after a small spurt to around 4,175 points and warned investors not to stay long on market advances. The market did move as per our anticipation. In fact, since the last two weeks we have been warning investors that the market was poised for a major reversal and that the investors should consider booking profits.

Any one who took the warning seriously would have got out of the market right at the top. The question now is where does the market move from here.The entire rise from a low of 3,164 points to a high of 4,322 points consisted of 1,158 points. The best level of support, the level from which the index is likely to restart its upward move, is around 3,850 points. This level is important from several angles. For one, the level of 3,880 is the 38.2 per cent retracement level of the entire upward move. Secondly, notice the appearance of agap (a window) between the level of 3,840 and the level of 3,900 points. And thirdly, the trendline drawn from the low of 3,164 points (see chart) could offer support to the declining index. The level of 3,850 points does offer formidable support to the index.

In the event the index does break below this level, the index could decline to 3,700 or lower. The union budget is scheduled to be announced on June 1. After the expected decline the market will be preparing for its mandatory pre-budget rally. In the short-term ie, next week, the market may not stage a torrential decline as Thursday's trading was a `hammer'. It could stage a quick rally to around 4,150 points in one or more sessions before the decline starts. Traders and investors are again cautioned not to get caught on the long side at higher levels.

Timex Watches: Good potential

Some of the stocks in the B1 and B2 groups have suddenly started to look interesting. This one has broken above its falling trendline with a sizable increase involumes. The stock has also managed to rise above its resistance level of Rs 23.70. The stock does have the potential to rise to around Rs 45 in the medium term. The weekly MACD (Moving Averages Convergence Divergence) is in a buy mode. One may consider buying this stock at current levels. Keep a stop-loss level below Rs 20.

Himachal Futuristic: Bullish

This stock has shown a breakout beyond Rs 25, a major resistance level. The breakout was supplemented by a substantial increase in volumes. This breakout is a major reversal signal. This stock shows a significant potential to appreciate. One may consider investment in the scrip. Keep a stop-loss level below Rs 20.

Bajaj Hindustan: Rise likely

This stock is slightly below its resistance level of Rs 110. If there is a breakout from this level the stock could show a meteoric rise. The most prudent policy in this case would be to an await breakout before entering into it. The weekly MACD is in a buy mode and the volumes also have a tendencyto rise. One may buy at breakouts. Keep a stop loss below Rs 100.

Tata Tea: Sell short

This stock has broken on the downside from its important support level of around Rs 418. As we expect the market to show a rally, it is best that traders wait for the stock to rise to around Rs 418 before selling short. Keep a stop loss above Rs 422.

Telco: Buy long

The appearance of a bullish `piercing pattern' just above the rising trendline is a bullish sign. The stock may stage a rally to around Rs 290. Traders may enter long. Keep a stop loss below Rs 270.