The market showed some signs of stabilising after the agonising decline that it witnessed prior to the budget. The index showed improved sentiment since the government announced a series of measures to prop up FDI into the economy. The market has long been expecting the introduction of buy-back of shares. Some amendments in the Companies Act are needed before a company is allowed to buy back its own shares. Though this step is welcome, one must beware that this can also take an ugly turn as several corporates can indulge in insider trading and other such nefarious activities. The stock markets surveillance mechanism should be geared enough to meet these challenges. Unless these factors are taken intoaccount the buy back of shares will acquire a notorious reputation in future.

Last week, it was anticipated that the market may not touch its previously established low of 2961 points. We were alone against popular consensus that the market was fast approaching the low of 2713 points. Mercifully, the low of 2961 points held forth against very forceful selling. Though the market did slide below the low of 2961 points the break below was marginal and momentary. Following this, the recovery was swift. The price pattern formed near the low of 2961 points offer some very interesting insights. Note, that on first two trading days the index formed small bodied candles with long lower shadows signaling prevalence of buying at lower levels. In fact the Tuesday's trading session was almost (our favourite) a `near doji'. The Wednesday's trading resulted in a strong white candle. The combination of patterns formed in these three days can be classified as either a 'morning star' or a 'morning doji star'. Though theyare not ideal bookish patterns but the basic conditions for these patterns are met, allowing us to classify these patterns appropriately. Now this is the second time in as many weeks that a bullish candlestick pattern has appeared. The first instance being on June 16 when a 'hammer' appeared and it was confirmed on the following day. The preponderance of patterns suggests that the market may be undergoing a reversal process.

The supporting indicators are also showing signs of reversal. For the first time since the MACD (Moving Averages Convergence Divergence) has shown a buy signal. The 14-day RSI (Relative strength Index not shown here) has also given a buy signal. The 12-day ROC (Rate of change not shown here).

On the weekly charts the index has formed a white candle which is more like a spinning top. This is the first white candle to appear after a gap of nine weeks!. Last week, we also expected that the index will be rangebound between the levels of 3000 - 3450 points. There is a bit of weakness inthe market and over next day or two the market may show a small decline or listless sideways movement.

But over all from a medium term point of view, our opinion remains unchanged. It is still expected that the index will face severe selling pressure at around 3450 points. Long term investors may consider selective buying keeping strict stop loss levels. Shorter term traders may consider buying long in the anticipation of the index rising to around 3450 points.Digital Equipment: On the rise

On the weekly charts a very strong bullish engulfing pattern appeared. the location of the pattern was just above the support level of Rs 105. The only problem is that in last couple of sessions the stock has gone up too far too fast. The strategy that may be adapted in this case is as follows. As the stock is just below its resistance level of Rs 30. Investors may wait for the stock to move beyond this level (Rs 130) and keep a stop loss level below Rs 127. Or in case the stock fails to move beyond Rs 130 onemay expect a small correction to around Rs 115 and keep a stop loss below Rs 100.

Philips: Bright outlook

During the week's trading several stocks have formed a bullish engulfing pattern. Philips is one of them. In this case this pattern appeared just above the support level of Rs 72. The strategy in this case is very similar to the one mentioned above. Investors may consider buying this stock at the breakout beyond Rs 95 and keep a stop loss below Rs 90 or wait for the stock to decline to around Rs 80 and buy with a stop loss below Rs 70.

Finolex Cables: Worth buying Since about a year and a half this stock is moving in a range of Rs 100 on the down side to a high of Rs 200 on the upside. The logic is clear buy at around Rs 100 and sell at around Rs 200. The daily MACD (not shown here) has given a buy signal. One may consider buying at around current levels. Keep a stop loss level below Rs 100.

State Bank: Buy on decline

The stock is just above its support level of Rs 204. Onemay buy long at current levels. Keep a stop loss below Rs 203. Tisco: Tisco may decline to around Rs 119 in the short term. Buy at Rs 119 for a decent appreciation in price. Keep stop loss below Rs 116.