A temporary bottom during mid-week could produce another bounce.

The sharp decline which started towards the end of the week is likely to culminate around the 14th-15th December after which another bounce could take place. However, the strength of this bounce will depend upon how deep we go in the current decline

S&P Nifty close: 4866.70


Market Trend

Short Term: Down        Medium Term: Down            Long Term: Down

The Nifty opened flat this week and recovered marginally thereafter. However, after failing to hold on to the on to the gains the index slipped sharply in the last two days of trade to close 184 points (-3.63%) in the red. 
The weekly histogram MACD remains below the median line confirming that the bears are in control. The bulls staged a smart comeback but the volumes during the rise were poor, raising doubts as to its sustainability. This resulted in last week’s decline, which too has been on low volumes, implying that we might move sideways in the next couple of weeks.

Here are some key levels to watch out for this week.  

  •  As long as the S&P Nifty stays below 4,936 points (pivot) the bears will have an edge as the trend remains down.
  •  Support levels in declines are pegged at 4,773 and 4,678 points.
  • Resistance levels on the upside are pegged at 5,030 and 5,193 points.

Some Observations
The bulls have staged a smart comeback but they have to ensure that they do not lose too much ground in the weeks ahead to keep their hopes alive.
1.    Resistance in rallies is pegged at 5,109 points (almost hit) and 5,263 points (61.8% and 78.6% retracement levels of the fall from 5,399-4,639 points.
2.    The volumes in last week’s decline have been poor implying that there is a lack of strength in the fall.
3.    The bounce till 1st to 5th December materialized as expected and one saw a sharp correction in the last couple of days.
4.    The Nifty has closed the “upside gap” area in the last decline raising doubts as regards to the sustainability of the corrective rise from 4,639 points.

Strategy
One saw a sharp decline during the last couple of days of the week. A culmination of this is likely during the course of this week around the 14th to 15th December from where we could see another bounce taking place. However, the strength of this bounce will depend upon how deep we go in the current decline. It will be a swinging market providing opportunities to the bulls as well as the bears depending upon who is more adept and nimble footed. Look for a small buy opportunity around the above mentioned time frame.
   
(Vidur Pendharkar works as a consultant technical analyst & chief strategist, www.trend4casting.com)

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