While the Nifty has been holding around the 5,400 mark, the bulls were unable to make any headway even though they have been in control. One will have to wait for the market to decide its immediate future course

S&P Nifty close: 5,386.70
Market Trend
 

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

The bulls succeeded in pushing the Nifty steadily higher through most of the week before easing off a bit at the end. The Nifty finally closed 20 points (+0.38%) in the green but failed to close decisively above trendline resistance shown in black. The volumes were marginally lower than last week implying that the even though the bulls are in control they have not been able to push the Nifty into the higher gear. The week ended at deuce on poor volumes as nor the bulls or bears failed to make any headway, leaving the future course of the market in suspended animation. However, the onus is on the bulls to push higher because they are the ones who have been in control.
 

The sectoral indices which outperformed were CNX IT (+3.18%), CNX MNC (+1.74%) and CNX PHARMA (+1.38%) while the underperformers were CNX REALTY (-2.20%), CNX INFRA (-1.86%), CNX MEDIA (-1.74%), CNX ENERGY (-1.32%) and CNX PSU BANK (-1.04%). The histogram MACD has moved up in line with the rise in the Nifty and as long as it remains above the median level the bulls are in control.

Here are some key levels to watch out for this week

•As long as the S&P Nifty stays below 5,401 points (pivot) the bulls can breathe a bit easy though the bears continue to be in control.

• Support levels in declines are pegged at 5,354 and 5,321 points.

• Resistance levels on the upside are pegged at 5,433 and 5,481 points.

Some Observations

1. The Nifty continued its upward march to make a recent new high but the volumes were lower than last week.
2. The ‘gap’ area between 5,246 and 5 260 has to be defended by the bulls at all cost or else they would find the going tough.
3. We saw the Nifty move briefly above the resistance line (in black) but it pulled back to close around it.
4. We head into the 5^th week from the recent low of 5,032 points.
5. The volatility of the week has contracted and we are expecting an expansion of this in the near future. It will be certainly worth the wait as we will get a swift move in the direction it decides to take.

Strategy

We saw the bulls succeeded in holding the Nifty around the 5,400 mark, but on the other hand they were unable to make any headway even though they have been in control. The volumes continued to be poor and the volatility has shrunk, expecting us to believe that a swift either side move is likely as it expands, but there is no clue as to the direction as yet. The simplest stop loss one can keep on longs is the last week’s low of 5,368 points in close as we wait for the market to decide its immediate future course. One thing is clear that the bulls hold the edge even though the volumes are poor and they have not been able to make any headway in the last couple of weeks.
 

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