Bulls survive a scare as Nifty endures 5,171

Vidur Pendharkar 31 March 2012

Strong resistance is pegged in the 5,372-5,385 points range and unless and until this is decisively taken out the bears continue to hold a slight edge. One should persist with the strategy of selling in rallies especially close to the above mentioned area

S&P Nifty close: 5295.55

Market Trend
Short Term: Sideways Medium Term: Sideways Long Term: Down

The Nifty opened flat and sold off immediately to the bulls on the brink as it hovered around recent low of 5,171 points (in fact it was broken during intra-day trading) but holding above it in close. The fact it survived the F&O (futures and options) settlement day resulted in short covering which took the Nifty to the high of the week before settling 18 points (+0.33%) higher. This has resulted in a “hammer formation” (indicating at least a temporary bottom) but further evidence is awaited.

The sectoral indices which outperformed were BSE Healthcare (+2.46%), BSE Fast Moving Consumer Goods (+2.04%) and BSE Metal (+1.10%) while the gross underperformers were BSE Power (-2.43%), BSE Consumer Durables (-1.03%), BSE PSU (-0.97%) and BSE Capital Goods (-0.83%). The weekly histogram MACD continued to move down but is still above the median line indicating that the bulls’ hopes are still alive. However the volumes were flat during the recovery.

Here are some key levels to watch out for this week

As long as the S&P Nifty stays above 5,246 points (pivot) the bulls would breathe easy even though the intermediate trend is sideways.
Support levels in declines are pegged at 5,185 and 5,075 points.
Resistance levels on the upside are pegged at 5,356 and 5,417 points.

Some Observations
1.   The Nifty closed above the pivot of last week and has formed a ‘hammering’, raising hopes of the bulls of the recovery gaining further ground.
2.   Weekly averages still continue to be negatively phased hence a close below these would result in the selling pressure accentuating.
3.   Unless and until the 5,372-5,385 points range is taken out in close the bears will hold the egde and a break of the recent low of 5,171 points (in close) would set the cats amongst the pigeons.

Strategy
Strong resistance is pegged in the 5,372-5,385 points range and unless and until this is decisively taken out the bears continue to hold a slight edge. One should persist with the strategy of selling in rallies especially close to the above mentioned area. We are likely to witness see-saw trading during the course of this week as the bulls and bears fight to take control. The successful testing of the low of 5,171 points has become paramount importance for the bulls to defend this level at all costs to prevent chaos.

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

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