The BJP government went through a major round of crisis last week. Jayalalitha just about relented and gave up the idea of withdrawing support to the BJP government, for now. Jayalalitha's position is enviable and yet pitiable. She is powerful in the sense that she can hold the government to ransom. But her position of power is dependant on the BJP. She can exert power till the time the BJP government remains in place. If the government falls, she will virtually become a nobody and her importance at the national levelwill be greatly reduced. The second threat the BJP government faces is from the Congress. The Congress has all along maintained that it is willing to remain in the opposition. But now there is a growing hunger in the party to return to power. It matters little that they have not yet projected the person likely to be the prime minister. The current political scenario reflects a sad state of affairs in a country celebrating 50 years of independence.

Internationally, the threat of China devaluing its currency is quite a possibility. In all probability, it will devalue as most of its competitors in Southeast Asia have seen the value of their currency fall. If China does not devalue then its exports will suffer and it will lose its competitive edge. China commands a substantial share in the world market and the prospect of it devaluing its currency is likely to cause a small panic in the domestic market.

Last week, we anticipated that the index is likely to test its low of 2,950 points and a break below thislevel could take the index to even lower levels. During the week the index broke marginally below its low of 2,950 points and staged a small rally. In the three trading sessions to Thursday, the index formed a bullish candlestick pattern, the `Morning Star'. This is a usually powerful reversal pattern but on the last trading day of the week a black candle appeared. This causes an iota of doubt regarding the significance of the pattern under the circumstances. Further, on the weekly charts one sees the appearance of a long black candle. This is not a bullish sign. Now we have a real predicament as on the one hand we have the appearance of a bullish pattern at a point near the support level of 2,950 points. But the pattern is not confirmed and the weekly charts show a sign of bearishness. The indicators also do not show any reversal sign. The short-term 8-day RSI (Relative Strength Index) has still not shown signs of divergence and it has shown a tendency to remain in the oversold zone. The daily MACD (MovingAverages Convergence Divergence) is still in a sell mode. On the whole, the indicators do not show a reversal sign.Earlier in the article, we cited the logic behind the uncertainty involved in predicting the market's behaviour. The only way to overcome this uncertainty is to adopt a wait and watch game. If the index opens with a gap on the downside on Monday and/or goes below the level of 2,950 points, it is a sign that the market is going up. But if the index manages to stay above the crucial level of 2,950 points, there is a chance that the index may rally. The level of 2,950 is the key. If the index breaks below this level then one may expect a panic selling.

Gujarat Ambuja Cement: Low-risk buy

Currently, this stock is quoting near its low. It has been observed that the stock has shown a tendency to reverse from the level of around Rs 180. The 12-week ROC (Rate of Change) is deep in the oversold zone. At current levels, the stock is a low-risk buy. One may enter at current levels. Keep a stoploss below the level of Rs 170.

ITC Agro: Good potential

This stock has managed to break above its resistance level of Rs 64 and has been on the rise. The rise in the price has been accompanied by a smart increase in volumes. The stock does show a potential to rise to around Rs 100. One may consider buying this stock at current levels. Keep a stop loss below Rs 65.

Amararaja Batteries: Await breakout

This stock is on the verge of showing a breakout beyond the level of Rs 164, its previous high. If the stock does manage to show a breakout, the upside potential would be substantial. But one may exercise caution and wait for the stock to show a breakout beyond the level of Rs 164 before buying. If one manages to buy on breakout keep a stop loss below the level of Rs 150.

Glaxo: Sell short

The appearance of a `doji' just below the resistance level of Rs 387 suggests weakness in the stock. One may consider selling short. Keep a stop loss above the level of Rs 396.

Tata Tea:Go long

On Thursday, the stock formed a long white candle which when see together with the previous day's trading has resulted in the formation of the bullish `engulfing pattern'. One may buy long. Keep a stop loss below Rs 279.