Few
weeks back I had mentioned that nifty will not move above 5500 and will slide
down to 5200-5246 and then it was mentioned that nifty will hold 5200 and would
rally till 5700. Market exactly behaved, as predicted and hope all of you have
minted tons of money.
Last week it was clearly mentioned that 5630 now seems a minor hurdle and
we may witness an extended rally towards 5700-5740, and then the focus will
turn to 5893-5924 see what has happened Nifty sky rocketed and placed a high of
5735 for the week.
During the week the government faced some political pressure for a roll
back in policy reforms but it remained firm on implementing the decisions to
allow FDI in retail and liberalize foreign investment in aviation
and broadcasting sectors.
The
weekly chart of the Sensex is in an up-trend. It has formed a bullish pattern
of a higher bottom and a higher top, and touched a 52 week high of 18867. The
‘golden cross’ has technically confirmed a new bull market. Keep in mind that
the Sensex is very close to the strong resistance zone at 19130 and 19800. Some
consolidation or correction can be expected before the resistance zone is taken.
Inflation
remains high, and the hike in diesel price has added fuel to it. Interest rates
are also high and so is oil’s price. The exports have declined due to the
economic slowdown in Europe and USA. The government needs to do a lot to control
its fiscal deficit. The economic environment is not yet helpful for a runaway
bull market. Equity sell-off in several PSU's has been lined up. That will put
further strain on liquidity. It is better to be cautiously optimistic than
being excitedly bullish.
The
up-trend in the daily chart pattern of the Nifty remains intact. The gap up
formed on Sep 14th at 5435-5530 was tested last week but was not filled. If the
gap remains unfilled in the coming days, or gets only partially filled, then it
may turn out to be a ‘measuring gap’ with an upward target of about 6198 for
the Nifty.
Technical
indicators are bullish, but looking overbought. The MACD is rising above its
signal line in positive territory. The ROC is positive and above its 10 day MA.
The RSI and the Slow Stochastic are inside their overbought zone. All four
technical indicators failed to touch new highs as the Nifty made a new 52 week
high. The negative divergences may lead to a correction or consolidation.
Conclusion:
Chart patterns of Sensex and Nifty have entered new bull markets and one can
use dips to enter. Now the next big oomph for the
market is the bailout package for power distribution companies which will be
taken up on Tuesday. On technical front Nifty has crossed its first barrier at
5630 and now the focus has turned to 5900. The Derivative data suggests that
Bulls still have lot of potential to take the index further up. The unwinding positions
at 5700 strike price Call options indicates that the expiry for September 2012 in
the coming week is likely to be in a range of 5700-5800 level. However Nifty
will face some hurdle at 5740-5760 but momentum
is strong for extension into 5900/5925. For the week, let us watch 5630-5925. The strategy is to hold on to investments and add on
correction into 5630-5550 for upside of 6000.
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