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The trend is down and rallies should be used as selling opportunities. The next significant turns (most likely tops) in the markets are likely at the beginning of the 3rd and 4th week of this month
S&P Nifty close: 5,086
Short Term: Down Medium Term: Sideways Long Term: Down
The Nifty opened flat and after a meagre rise sold off during the last couple of days of the week (we had envisaged that the markets are likely to turn volatile around 2nd-3rd May). A breach of the crucial support area between 5,135 and 5,154 saw some panic selling during the weekend resulting in the Nifty almost hitting the projected S2 level of the week of 5,068 points. Thus the Nifty ended 123 points lower (-2.34%) as the bears mounted relentless pressure.
The sectoral indices which outperformed were CNX IT (+2.65%) and CNX Pharma (+0.76%) while the gross underperformers were CNX PSU (-5.26%), CNX Infrastructure (-3.69%), CNX PSE (-3.52%), CNX Reality (-3.34%) and CNX Energy (-2.22%). The weekly histogram MACD fell further below the median line which is making things more difficult for the bulls day by day. The volumes were however lower during the fall.
Here are some key levels to watch out for this week
1. The Nifty is facing stiff resistance in the 5,300-5,340 area which has to be taken out in close for the bears to be shaken.
2. Weekly averages remained positively phased though marginally implying that the time is very short for the bulls and some desperate action is required on their part to salvage the already desperate situation.
3. For a very short-term reversal the previous week's high (5,279 points) has to be crossed in close.
The bulls have been pushed to the wall as the key support area of 5,135-5,154 points area has been broken. This has to be regained at the earliest if the bulls have to avert a whitewash. Last week the Nifty had completed the 50% retracement level (5,080 points) of the recent rise from 4,531-5,629 points and the 61.8% retracement level is pegged at 4,950 points. These are expected supports and the bulls better ensure that they are not broken otherwise the recent low of 4,531 points will be tested in the weeks/months ahead. The trend is down and rallies should be used as selling opportunities. The next significant turns (most likely tops) in the markets are likely at the beginning of the 3rd and 4th week of this month.
(Vidur Pendharkar works as a consultant technical analyst & chief strategist at www.trend4casting.com)