Nifty Market View: Trade worth Rs6.5 billion brings the NSE on its knees!
Vidur Pendharkar 06 October 2012

Volatility is likely to remain high as a move on either side is likely

 

S&P Nifty close: 5,746.95

Market Trend

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

After a flat opening the Nifty rose for four consecutive trading sessions during which it briefly crossed the R2 level of the week before a weird sell-off (worth Rs6.5 billion or $125.3 million and 59 erroneous orders) saw the Nifty hit a low of 4,880 points. If the 2G and Colgate were not enough, Friday’s NSE fiasco has added another blot on this government’s functioning as the National Stock Exchange (NSE) is its brainchild. The much-touted systems of the NSE were floored in no time and one hopes that stringent action will be taken against the exchanges too as they flouted the Securities and Exchange Board of India (SEBI) norms laid down after circuit filters are hit. Anyway, there have been these stray incidences of prices hitting vague levels in individual stocks for the past few years but this time it was blown up because most of the heavyweights were hit at the same time. How can 59 erroneous orders be placed? It’s high time the exchanges look at solving this problem seriously and mischievous elements are kept at bay. Despite this ridiculous event the Nifty closed 43 points (+0.77%) in the green this week. Volumes were significantly lower as compared to the previous week. The histogram MACD, which is above the median level, moved higher indicating that the bulls remain in control even though the short-term oscillators have ventured into overbought territory.
 

The sectoral indices which outperformed were CNX Realty (+6.21%), CNX FMCG (+4.13%), CNX MNC (+2.34%), CNX Media (+2.24%), CNX PSE (+2.14%) and CNX Infra (+2.05%) and while the underperformers were CNX Pharma (-1.62%), CNX IT (-0.34%), CNX Service (-0.08%) and CNX Finance (-0.07%).

 

Here are some key levels to watch out for this week

 As long as the S&P Nifty stays above 5,752 points (pivot) the bulls will be in control.

 Resistance levels on the upside are pegged at 5,810 and 5,873 points.

 Support levels in declines are pegged at 5,688 and 5,630 points.

 

Some Observations

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.      The Nifty is now moving within a sharp up sloping channel (in blue), support from which is pegged around 5,453 points and resistance is pegged around 5,860 points, this week.

4.      We have closed above the previous weekly top of 5,629 points (24 February 2012) which is a sign of strength as long as it stays above it.

5.      The weekly chart above also shows a channel (in brown) the resistance line of which is pegged around 5,965 points. This should be closely watched in the week ahead.

6.      We have completed 89 weeks (Fibonacci number) from the top of 6,338 points (05 November 2010) hence one has to keep a close watch whether the market starts correcting from around current or slightly higher levels.

7.      The volumes were significantly higher as compared to the previous week which was also the case a week prior to the previous significant top of 5,629 points (24 February 2012). Hence one needs to be alert for the slightest sign of a break of support.

 

Strategy

We expected volatility to increase (as mentioned last week) but no stretch of imagination 4,880 points being hit could be dreamt of. The trend continues to be up and we might finish this rise with a spurt close to the 78.6% retracement levels as well as the resistance line of the channel in brown. If the bears have to turn things around they have to ensure a daily close below 5,694 points. Till then the bulls are very much in control even though the oscillators have reached overbought territory. We are at an inflection point so keep the seat-belts on as the volatility is likely to remain high as a move on either side is likely.


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

 

Comments
Dipesh Dagha
9 years ago
We have completed 89 weeks (Fibonacci number) from the top of 6,338 points (05 November 2010) hence one has to keep a close watch whether the market starts correcting from around current or slightly higher levels.

This statement is being carried since last four weeks!! I dont understand the point of repeating it again and again even after the index has already surpassed that Fibo number of week. No significance to that now and its irrelevant!!!
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