Outcome of Silver Updates for 28th Nov

Yesterday had boldly mentioned that MCX Silver on hourly charts momentum is on the downside and will slide to 62500 once 63200 is taken, it was clearly specified that this downside movement will be a mere pullback and specified the COMEX level of $33.27 to accumulate with the stop of 32.67. What happened MCX Silver slipped to 61951 and COMEX was well supported near $32.67 placing a low at $32.92 from where it again turned around to $33.80 levels.

Silver Updates for 28th Nov

After completing a cup and handle pattern on the weekly charts we saw that Silver managed to zoom from 30.66 to 34.28. Again the Inverse H&S pattern formed on the daily charts added fuel to the rally and helped in taking out the hurdle of 33.27 and it rocketed till 34.28. However the rim of the cup is at 36 which once taken will target 49. What Next?

After forming a top at 34.28, the price is pushing lower, moving towards the awaited retest level and potential support around 33.27 & 33.50 levels. The overall bullish formation remains intact; I consider the current retreat as a mere pullback, only a clear break below 32.67 should be a concern for the current rally.  Traders can buy on dips near 33.5 & 33.27 with a stop at 32.67. 

MCX Silver Dec future closed at 63536. On hourly chart Silver is heading down and momentum is on downside. However the highs formed near 64200 have now become a major top on chart and remains strong resistance. And on downside 63160 remains the support and below that it can slide till 62780 and 62500.

Weekly Outlook of Nifty from Nov 26th - Nov 30th

Last week it was mentioned “Nifty is at critical level and trend line will decide the trend of nifty if holds 5545/5530 then next wave may take nifty to 5940-6000. The immediate support is at 5526/5500; test/break here will quickly extend weakness into 5447 where it is good for strategic players to buy the second lot holding the final lot for 5400 with stop on break. There are strong resistances at 5630/5677 which should hold to retain bearish undertone into 5400. For the week, let us watch 5500-5630 with extension limited to 5447-5680.”

During the week Nifty could hold up the support of (5545) and ended the week placing a low at 5548 and a high of 5643. NIFTY traded in consolidation mode between negative zone of 5640-5670 and strong support at 5545-5526 (low of 5548) before comfortable weekly close at 5626. Despite strong bearish set up NIFTY held well on FII support and increase in investment limit for LIC, largest domestic institutional investor in the market.

The index closed above its 50 day EMA on the last two days of the week, after spending 4 days below it. However Bears are still in the game. The index failed to move above its falling 20 day EMA. As long as Sensex trades above its rising 200 day EMA, the bull market remains intact. Bears are unlikely to give up easily.

Daily technical indicators are bearish, but showing signs of turning around. The MACD is below its signal line in negative territory and moving sideways, while the histogram has started to rise. The ROC is negative, but has moved up slightly towards its falling 10 day MA. The RSI failed to climb above its 50% level, and is dropping towards its oversold zone. The Slow stochastic has emerged from its oversold zone, but is well below its 50% level. Bears are unlikely to give up easily.

After a close just below the trend line in the previous week, the weekly chart pattern of Nifty pulled back to close exactly on the uptrend line last week. Despite the brief drop below the uptrend line, the index is trading above its 20 week and 50 week EMAs. The bull market is still intact.

Conclusion: Chart patterns of Sensex and Nifty are still in consolidation mode. As long as the indices trade above their 200 day and 50 week EMAs, the bulls will have the upper hand. However there are no strong bullish cues at this stage and also there is risk of withdrawal of FII support for equity market. There are lot of risk factors in the game such as political agreement on reforms, sovereign rating downgrade, slippage in growth, overshoot in fiscal deficit, elevated trade deficit, high dependence on external liquidity, elevated inflation, possible delay in shift into growth supportive monetary stance etc.  On Technical chart Index is still trading on the edge of lower support line of the price channel and also mentioned about the 5^th wave which could take Nifty to 5940 if it manages to hold 5545 & 5526 and finally it did turn around exactly from the same level. However the derivatives data suggests that there is an equal force from Bull and Bear and NIFTY is stuck between level 5600 and 5700 for the coming week. The gap zone between 5447-5526 remains critical support in case of any negative result from the Winter Session. At same time the upper side seems restricted around 5750 till the Nov F&O Series expiry even if Winter Session positively surprises with agreement between government and option parties on various reforms. So for the coming week I expect NIFTY to bounce back within this range. Keep an eye on major supports at 5545/5526 and watch 5662 for further up move.

Weekly Outlook of Nifty from Nov 19th - Nov 23rd

Last week it was mentioned that a big fall is ruled out “Use the opportunity to accumulate good quality stocks. However strong domestic cues are needed for extended bullish undertone beyond 5780-5830 while 5630-5580 stays firm. There is good value buying seen at 5630-5580 to retain bullish undertone into short term. For the week, let us watch 5630-5780 with extension limited to 5580-5830. It is traders market and considered good to buy at 5630-5580 and sell at 5780-5830 with tight stop on break thereof.”

During the week Nifty failed to cross the 5720 mark placing a high of 5719 and on Friday dropped near the trend line support (5545) placing a low of 5560 for the week. 

The Selling pressure has now pushed the daily chart of Sensex below its 50 day EMA and the trend line at (18290) and also near to the ‘gap’ area (18284). The index closed the week below the uptrend line, and above the ‘gap’. However a big fall in the Sensex was ruled out due to several bullish signals. But ultimately the Sensex did close below the uptrend line. It may be sensible to remain cautious. However, one need not sell-off in panic as the breach and close below; the uptrend line has not gone beyond. Only a close below 17900 will technically confirm a breach of the uptrend line. Secondly, the index has received support from the top of the ‘gap’. So there is a possibility that the index may bounce up from here and move above the uptrend line.

What if Sensex closes the gap? Well, an index or stock closes a ‘gap’ only to resume its previous move. So even if it closes below 17900, it may not be bearish, if the index bounces up from the 200 day EMA and resumes its up move.

The immediate term outlook is weak as weekly close below 18290 can take bulls out of the street. The global bourses also do not provide support driven by uncertainties in the US and Euro zones. The domestic cues are worse, hence may need to allow deeper correction for better value buying.

Nifty has moved below its 50 day moving averages after 45days in last session and closed at 5574. Nifty is trending down since five days, in other words nifty is daily closing at a lower price than its previous day’s close. Nifty is near its long term trend line support around 5545. If this trend line works for nifty in coming session then we may see a 5th wave up move till 5940. Nifty 5500 put is standing with highest open interest at 70,70,300 contracts  indicating that 5500 can provide support in nifty and 5500 call added fresh 15,10,850 contracts in open interest. FIIs bought index option worth Rs. 1400 cores and addition in open interest 5500 call seems that FIIs have bought option (5500 CE) in dip.

Weekly technical indicators are showing signs of weakness, but haven’t turned bearish yet. The MACD is touching its signal line in positive zone, after correcting a bit from its overbought region. The ROC has crossed below its 10 week MA, but is still positive. The RSI has slipped from its overbought zone. The Slow stochastic is sliding down, but remains inside its overbought zone. A drop below the 20 week EMA is a possibility in the coming weeks.

Conclusion: Chart of Sensex and Nifty are still undergoing consolidations which have turned into corrections below known resistance zones. It is important for NIFTY to get back into familiar trading range of 5580-5780 to knock out bearish momentum. Nifty is at critical level and trend line will decide the trend of nifty if holds 5545/5530 then next wave may take nifty to 5940-6000.

The immediate support is at 5526/5500; test/break here will quickly extend weakness into 5447 where it is good for strategic players to buy the second lot holding the final lot for 5400 with stop on break. There are strong resistances at 5630/5677 which should hold to retain bearish undertone into 5400. For the week, let us watch 5500-5630 with extension limited to 5447-5680.

Weekly Outlook of Nifty from Nov 12th - Nov 16th

Last week it was mentioned that “On Technical chart NIFTY index has still not managed to cross 5720 level. Nevertheless it has at least moved above the trend line and formed a “Doji” candlestick (indecision). So the conclusion is though the technical chart is on the border of giving confirmation for upside movement, the derivative indicators have already started giving confirmed positive signals with an upper target of 5900.”

The smart rally in NIFTY from set short term base at 5580 lost steam at 5780 ahead of set objective at 5830/5940 correction from there found support at 5680 for weekly close at 5686.

The daily chart of the Sensex has now made two unsuccessful attempts to break out of the narrow 300 points range within which it has been trading for the past few weeks. The first was on Oct 30^th,  a downward break attempt due to the disappointment over RBI’s failure to effect a cut in repo and reverse repo rates.

The second was on Nov 7^th, which was an upward break out attempt, following euphoria over Obama’s re-election as the US President. Both break out attempts turned out to be ‘false’, as the Sensex reverted back inside the rectangular range.

The index is trading just below the resistance zone between 19132 and 19737 which has so far proved a tough hurdle for the bulls.Now the million dollar question would be; are the bulls getting exhausted by their repeated failure to overcome the resistance zone? Is the Sensex getting ready for a big fall? On the evidence visible on the chart above, the answer is ‘No’.

Observation on the chart suggests a period of consolidation below a known resistance zone in a bull market. Once the consolidation is over the Sensex is likely to gather the strength to climb above the resistance zone. Now, Why so? For there is more evidence supporting a bullish trend. As there are supports from trend line if that doesn’t work, there should be strong support from the ‘gap’ area, and below it, from the 200 day EMA. Therefore, a big fall in the Sensex can be ruled out for now. 

Technical indicators are looking weak, but not bearish. There is a negative divergence seen on Sensex at the top of 18973.

The weekly chart of the Nifty continues its sideways consolidation below the resistance zone. Weekly technical indicators are bullish but showing signs of weakness. The MACD is positive and above its signal line, but moving sideways. The ROC is also positive, and has crossed above its 10 week MA. The RSI and Slow Stochastic are inside their overbought zones, but dropping down a little.

The rally from the higher bottom of Jun ‘12 is however, the first leg of a new bull market. The ‘golden cross’ and the bullish pattern of higher tops and higher bottoms have technically confirmed it.

Conclusion: Chart of Sensex and Nifty are undergoing consolidations below known resistance zones after two ‘false’ break-out attempts. Use the opportunity to accumulate good quality stocks. However strong domestic cues are needed for extended bullish undertone beyond 5780-5830 while 5630-5580 stays firm. There is good value buying seen at 5630-5580 to retain bullish undertone into short term. For the week, let us watch 5630-5780 with extension limited to 5580-5830. It is traders market and considered good to buy at 5630-5580 and sell at 5780-5830 with tight stop on break thereof. There is no change in expectation of extended rally into 5940 on signals of monetary easing from RBI.