The fears that Jayalalitha would not extend support to the BJP government proved to be untrue as she relented in favour of continuance of support to the BJP government. The news that Jayalalitha was to extend support to the BJP government came on last Sunday itself. It would have been anybody's guess that the market would react positively to it. But more importantly the fact that put the index on steroids was that the US was likely to dilute the severity of sanctions levied on India following nuclear blasts. The market had feared that the impact of sanctions on the economy would be disastrous. With this fear now considerably diluted and the government firmly in saddle the market may now be assumed to gather further strength in forthcoming weeks.Last week, it was mentioned that the index was forming a descending triangle and for determining future direction of the market it is necessary to await breakout.

During the week the index broke the triangle from the upside suggesting that this was in fact a reversal pattern. Another important development taking place during the week was the trendline drawn from the high of 4605 points to the high of 3980 points was broken on the upside. This is to be considered as a bullish development considering a long term view. On the weekly charts the current week has formed a bullish long white candlestick. This is the belt hold line and denotes bullishness. The Sensex is currently slightly below its resistance level of 3350 points. The Friday's trading resulted in formation of a 'star'. This indicates that there is a little bit of hesitancy in the market. `Stars' by themselves are not considered to be reversal patterns but their appearance only warns us that there may be something wrong with the trend. Anotherfactor is the location of this pattern. Considering that under the current circumstances the pattern is located just under the resistance level of 3350 points signals that the market may slightly be vulnerable to selling pressure since it has gone up five days in a row. The most 12-day ROC (Rate of Change) is showing a slight overbought reading. The 14-day RSI (Relative Strength Index) is well below its overbought zone. The MACD (Moving Averages Convergence Divergence) is in a buy mode. If the market fails to move beyond the level of 3450 points there is possibility that the index may stage a small correction. This correction could be the last before a major up trend begins. The time is right to pick up stocks which have a decent scope for appreciation.

ABB: Worth buying

This stock has broken out from the its resistance level of Rs 432. The MACD on the daily charts (not shown here) has given a buy signal. Power stocks have been among the major gainers in last couple of days. One may considerbuying this stocks at current levels. Keep a stop loss level below Rs 425.

Esab India : Buy signal

This stock has shown a break out beyond the level of Rs 82. The breakout has been from the reversal pattern double bottom and it has been accompanied by a increase in volumes. The MACD on the daily charts (not shown here) has given a buy signal. The stock has seen a steep decline and this reversal could take the stock to around Rs 110.

One may buy a stock at current levels Keep a stop loss below Rs 75.

E Merck: May rise

The pattern in this stock is very similar to what has been seen in the above two recommendations. This stock has broken out of its double bottom formation. The breakout has been accompanied with an higher increase in volumes. The MACD on daily charts has given a buy signal. One may buy keep a stop loss below Rs 205.

L&T: Sell short

This stock is poised just below its resistance level of Rs 242. Traders may sell short at around Rs 242. Keep a stop loss above Rs250.

Reliance: Buy long

This stock has broken above it resistance level of Rs 149. Traders may buy long. Keep a stop loss below Rs 147.