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Nifty 4,910-4,965: Crucial resistance area to watch out for

The bulls succeeded in arresting further damage in the first couple of days and the Nifty recovered towards the end of the week. If the Nifty holds the 4,619-4,647 points range in any decline, expect this corrective rise to continue around the 28th-29th of December

S&P Nifty close: 4,714    

 

Market Trend
Short Term Down        Medium Term Down            Long Term Down


The Nifty opened weak and slipped further to dip marginally below the first support level of the week of 4,549 points where the short-term oscillators reached oversold territory. This resulted in short-covering which saw the Nifty hit a high of 4,763 points before profit-taking pared some gains resulting in it closing 63 points (+1.34%) in the green. The sectoral indices which outperformed were BSE Oil & Gas (+3.26%), BSE FMCG (+3.20%), BSE Auto (+2.15%) and BSE Consumer Durables (+1.95%) while the underperformers were BSE Capital Goods (-3.18%), BSE Metal (-1.56%) and BSE Realty (-1.36%).   

The weekly histogram MACD remains below the median line confirming that the intermediate term trend is down. Last week’s recovery was on volumes which were on par with the previous week. Immediate resistance in this rise is pegged in the 4,882-4,910 points range from the retracement as well as the trendline which connects the tops of 5,360-5,099 points.

 Here are some key levels to watch out for this week

  • As long as the S&P Nifty stays above 4,669 points (pivot) the bulls’ hopes are alive and this contra trend rise could go a bit further.
  • Support levels in declines are pegged at 4,575 and 4,437 points.
  • Resistance levels on the upside are pegged at 4,808 and 4,902 points.

Some Observations
1.    The bulls succeeded in arresting further damage in the first couple of days and the Nifty recovered towards the end of the week as expected.
2.    Resistance in rallies is pegged at 4,815 and 4,882 points (50% and 61.8% retracement levels of the fall from 5,099-4,531 points).
3.    Assuming that this corrective rise shows strength, then resistance is pegged at 4,862, 4,965 and 5,068 points (38.2%, 50% and 61.8% retracement levels of the fall from 5,399-4,531 points).
4.    If the Nifty holds the 4,619-4,647 points range in any decline, expect this corrective rise to continue around the 28th-29th of this week.

Strategy
The Nifty did recover some lost ground during the weekend as expected, but did not have the same vigour as the previous corrective rise. However, there is no confirmation as yet that this corrective rise is over and it could stretch itself up to the 28th-29th December where we could see a top taking place around the above mentioned resistance levels. The 4,910-4,965 points range is crucial resistance from the short-term trend perspective because the trendline connecting the tops of 5,360-5,099 points as well as the retracement level of the decline from 5,399-4,531 points falls within this range. Unless and until this is crossed decisively (in close) the bears will continue to have the upper hand and it would be prudent to exit trading long positions around the above mentioned dates.

(Vidur Pendharkar works as a consultant technical analyst & chief strategist, www.trend4casting.com)

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