Weekly Nifty View: Bulls survive and regain some lost ground but more efforts required
Nifty staying above 5,606 will keep the bulls in their comfort zone
S&P Nifty close: 5,626.60
Short Term: Down Medium Term: Down Long Term: Down
After a marginally higher open this week, the Nifty fell just below the 5,550 mark but held on. After a couple of days of narrow range movement the Nifty recovered from Wednesday to close above the weekly pivot of 5,617 points, implying that the bulls are very much alive though not kicking. The volumes were also significantly higher as the Nifty closed 56 points (+0.94%) in the green instilling hope that we might be in a corrective phase. The Nifty recovering above the low of 5,583 points also lends some support to this thought. The histogram MACD which is below the median level indicates that the current recovery has to be treated as corrective and the bulls require to put in much more efforts to negate the bearish undercurrents.
The sectoral Indices which outperformed were CNX Media (+2.94%), CNX FMCG (+2.79%), CNX Consumption (+2.07%), CNX Auto (+1.59%), CNX IT (+1.14%) and CNX Finance (+1.03%) while the underperformers were CNX PSE (-1.56%), CNX Realty (-1.02%), CNX Energy (-0.90%) and CNX Commodities (-0.78%).
Some key levels to watch out for this week
• As long as the S&P Nifty stays above 5,606 points (pivot) the bulls will feel a bit comfortable.
• Support levels in declines are pegged at 5,569 and 5,511 points.
• Resistance levels on the upside are pegged at 5,664 and 5,701 points.
1. The Nifty has completed the 61.8% retracement level of the decline from 6,338-4,770 points pegged at 5,740.
2. The 78.6% retracement level of the fall from 6,338-4,770 points is pegged at 5,951 points, which also coincides with the top of the channel (in brown).
3. We have fallen below the previous weekly top of 5,629 points (24 February 2012) which indicates that any rally from here on will lack impulsive qualities.
4. Weekly channel support (in Blue) has been broken. The immediate priority for the bulls is to regain it (has to close above 5,685 this week for it) otherwise the going will get tougher.
5. Immediate support to watch out for is 5,516 which is the 38.2% retracement level of the rise from 5,032-5,815 points. This level is close to the support calculated by another method i.e., correction from 5,348-5,032 points is 316 points. Therefore 5,815 – 316 points gives 5,499 points.
6. The bulls have been able to defend the “gap area” between 5,447-5,526 points in the fall which is a positive for them.
7. Another important level to watch out for is the recent top of 5,448 points (24 August 2012) which should not be overlapped at any cost as this would confirm that all bullish hopes are dashed and that any subsequent rise would only be a selling opportunity.
8. Our assessment that the bulls are down but not out has proved to be wise as the Nifty did recover from mid week onwards.
One has to watch closely whether the Nifty is able to close the small “gap area” between 5,651-5,660 points which is the immediate hurdle. On the other hand if the bulls ensure that the Nifty does not go below 5,532 points in any correction next week, it will be another slight positive for them. Rallies will meet with selling pressure around the 5,700 points mark as the R2 level and the resistance line of the channel (in blue) are pegged around this level. As mentioned last week if the bulls defend 5,448 points in any decline in the coming weeks we would be heading for a rally into the year-end. The coming week or two should make the picture clear but traders should play the 5,500-5,720 range till then and use rallies as opportunities to sell till there is convincing evidence otherwise. The first warning of the balance shifting slightly is that corrections will be short-lived.