Those who bought last week should book profits on the very first day of the week as there is a possibility that we might see a dip (till mid-week)
S&P Nifty close: 5068
Market Trend
Short Term: Up Medium Term: Down Long Term: Down
The Nifty opened sharply lower as expected and marginally breached the low of 4,788 points (as envisaged last week) where the shorts got trapped. The Nifty briefly dipped below the R2 level of the week from where a counter attack by the bulls saw the Nifty recover smartly to engulf the entire last week’s candle, thus forming an “engulfing bullish line” pattern. This implies that a temporary bottom lasting for at least a couple of weeks more is in place The volumes were however almost the same as last week implying that this rise is also corrective in nature even though it could survive for a few weeks more. This week the Nifty closed almost at the high of the week, gaining a whopping 227 points (+4.68%).
The sectoral indices which outperformed were CNX PSU Bank (+7.76%), CNX Infra (+7.71%), CNX Realty (+7.26%), CNX Finance (+6.27%), CNX Media (+6.06%), CNX Auto (+5.50%) and CNX Energy (+4.92%) while the gross underperformers were CNX FMCG (+1.90%), CNX IT (+1.23%) and CNX Pharma (+0.92%). The weekly histogram MACD gained further last week but continues to be below the median line implying that rallies should be treated as corrective in nature.
Here are some key levels to watch out for this week
As long as the S&P Nifty stays above 4,974 points (pivot) the bulls need not worry. They should use 4,932 as a stop loss on longs.
Support levels in declines are pegged at 4,864 and 4,660 points.
Resistance levels on the upside are pegged at 5,178 and 5,288 points.
Some Observations
Strategy
Those who bought last week as was advised by us should book profits on the very first day of the week as there is a possibility that we might see a dip (till mid-week). If this decline comes close to last Friday’s low or around the above-mentioned support level one can think of venturing long for another small rise as this overall recovery could last till the third weekend of this month. However the crucial resistance area during this time frame is pegged between 5,185-5,275 points where one should be looking for exiting opportunities only.
(Vidur Pendharkar works as a consultant technical analyst & chief strategist at www.trend4casting.com)
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