Sensex continued to rally towards 20000 after the break
out above the triangle at 18450 and is now on the verge of touching a new 52
week high.
Daily technical indicators are looking bullish, but
overbought. The MACD is rising above its signal line, and has entered its
overbought zone. The ROC formed a small head-and-shoulders reversal pattern
inside its overbought zone, and has crossed below its 10 day MA; warning of a
correction, or consolidation. The RSI and Slow stochastic are inside their
respective overbought zones.
However, all four indicators are
showing positive divergences by touching higher tops. Remember that a market
can remain overbought for some time, so stay invested with a trailing
stop-loss.
Nifty
The weekly chart pattern of Nifty had four straight weeks
of higher closes but volumes have not been great. The 20 and 50 week EMAs are
rising and the index is trading above them. A new 52 week high is pending.
The next resistance at 6180 seems to be a tough challenge now. This high
was made during January 2011 and subsequently there was a fall of almost 1000
points without any pause. Thus, one can expect a huge profit booking as soon as
Index reaches near 6180 level.
Conclusion:
Chart patterns of Sensex and Nifty are on the verge of touching new 52 week
highs, and may move up to touch life-time highs. The next resistance is at 6180
which seems tough to cross. Derivatives data confirms 6200 as a strong resistance
for May 2013 F&O series. The highest OI for Call option is at 6200 strike
price Calls. Therefore the possibility of crossing 6200 level in this series is
very low. The MFLDX continues to be bullish and FII’s net positions in derivatives
segment supports continuation of the current rally for some more time. But this
indicator too is approaching its apex point where divergence is likely to
begin. Be selective. Pick
fundamentally strong mid-cap and small-cap stocks, and do maintain a stop-loss.
Trade cautiously as this is not the time for buying.
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