Dear Investors
On Friday Nifty closed at 5512(S2 was at 5509for the day) after testing a low of 5459
.( Nearer to S3 @5424 for the day, read previous blog)The days high,5614 was below the 200DMA and close of the day too was far below 200DMA indicating that, At last ‘BEAR SHADOWS’ have started becoming ‘LARGER’ on Indian stock markets.
Continued downward momentum with closing below significant moving averages (5DMA, 20DMA, 50DMA&200DMA) is definitely a ‘Sign of Ill Omen’ for Bulls’
5DMA:5649
20DMA:5814
50DMA; 5889
200DMA:5622
(For all non technical friends: Moving averages are the indicator of price movement for that period, indicating trend of the price movement in a specified period.. They do not predict price direction, but rather define the current direction. A simple moving average is formed by computing the average price of a stock over a specific number of days, weeks…. Most moving averages are based on closing prices. A 5-day simple moving average is the five day sum of closing prices divided by five. These are indicative of the trend in immediate future, short term, medium term and long term period. DMA form a good ‘support level’ or’ Resistance level’s indicator for market movements, so are important)
This, at least for short to medium term’ looks like ‘Bears are taking hold of the markets’
One more significant sign is, Volume movement during the day, It has been observed that whenever Nifty used to Bounce from the lows the ‘Volumes’ were on lower side while subsequent fall in Nifty was with ‘Heavy Volumes’ Indicating predominance of either sellers or profit takers at every higher level.
What Next ?
The Answers are:
A) Wait and watch
One is advised to wait to see if Nifty breaks the 5500 levels decisively on closing basis or moves in one more ‘Down Range’ of say 5480- 5600 and then with an event like ‘Budget’ in near term makes a ‘Bounce’ to the levels of say 5620 5700/5777-5800. Chances of Nifty forming higher bottom in near future are to be observed carefully ((Present rally had started from 5330/5362, April 5th 2010, to reach at 6312 /6330 on Nov.1st 2010)
As that may give a bleak chance of reversal, for Nifty has to form a higher bottom (Than 5330) at and around 5400/5420
Level and maintain up ward journey with breaking of immediate higher tops
B) Sell On Rise
As long as market, Nifty, does not move above 200DMA on closing basis and remains above that with good volumes ,investors are advised to ‘Book Profit’ AT ALL HOGHER LEVELS up to 5880 Bears can create short positions at higher levels only to be covered at and above 5880. The close above 5880/5906 will be the signal for ‘Bulls’ to enter the ring otherwise it will be ‘Bear Strength’ market
C) Invest for Long term
All long term investors are advised to do ‘Creeping’ buys at all the levels below 5440/5330 till 5330 is broken on closing basis. Breech of 5330/5280 will be signaling ‘Medium term ‘’Trend reversal’ to Bear Market
IMPRESSION:
For last few trading sessions Nifty is forming a series of ‘lower tops and lower bottoms’, and I think a good example is what happened to that 5690-5770 band because we rebounded from that range number of times in the last two months but in next trading sessions we kept on lowering the trading ranges indicating that Nifty is getting weaker and weaker, and eventually it broke down the 200 DMA a couple of days back. So yes I think unless the market really moves down to major supports which I see around 5400-5440 I don’t see too much of a change in market sentiment
Technical View:
On Friday Nifty again closed below 200 days moving average (DMA). The Market sentiment is ‘Negative’ and it is expected to trade negative bias. A bounce back from the day's low is cannot be ruled. For Monday market is likely to trade in a range of 5,400 to 5,580. For Nifty the next major support may find at 5420 and 5380. Resistance could find at 5610-5690 levels.
Technically nifty is in oversold position but that does not mean that the bounce back is going to happen even if it happens in early trading hours one should wait for creating any positions.
Let things get settled
NIFTY PIVOT: 5528
R1 (First resistance level) is @ 5597
R2 (Second resistance level) is @5683
R3 (Third resistance level)is @ 5752
Significance
Because of oversold conditions Nifty may ‘Bounce’ to R1 (5597) levels indicating ‘Short covering by ‘Weak Bears’ and /or ‘Bottom Fishing’ by ‘Adventurous Trades’ Any close above R3(5752)should be looked up on seriously.
S1 (First support level) is @ 5442
S2 (Second support level) is @5373
S3 (Third support level) is @ 5287
Significance
S2 (5373) is to be taken as most important support for nifty to remain in Medium term’ bullish trend. Any close below S3 (5287) SHOULD BE TAKEN SERIOUSLY as trend change to’ DOWN’
Ward direction.
VXI (Volatility Index)
PIVOT IS@ 22.70
Previous close is @ 22.09
Last trading Days Top was @ 23.79
R1 23.66
R2 24.75
R3 25.71
S1 21.61
S2 20.65
S3 19.56
Significance
On the volatility front the Indian Volatility Index (VIX) has ended with gains of 2.22% at 22.58 indicating volatility has increased in the markets.
Any close of VXI above 24 will be signaling a great volatility in markets.
Refreshing the Values:
Nifty values
Low 2584 on OCT 20 2008
High 6312 ON NOV 1 2010
---------------------------------------------------------------------------------------------------------------
SHORT TERM
LOW 5362 (July 15,2010) HIGH 6312(Nov.01 2010)
5DMA@5649
20DMA@5814
50DMA@5889
200DMA@5622
Significance
Market has closed below all the DMAs indicating short term trend ‘Negative’
Bounce back to the levels of 5 DMA (5649) and even 20 DMA (5814) can be used to book profits
Persistent close below 200DMA (5622) is to be taken as ‘Negative’ for markets in coming days to weeks
CONCLUSION
Wait, Wait and Wait if not possible
‘Meditate’ on side lines or Pray ‘God’
STOCK SPECIFICS
Day traders can take long positions for ‘Quick’ profits at lower levels, 5420 and book out at ‘Bounce’
ICICI BANK
SBI
RIL
TISCO
STERLITE
HINDALCO
Mphasis
GMR Infra
Punj looyed
Suzlon
DLF
HCC
REC
POWERGRID
NTPC
ARVIND
ALOK
TALWALKARS
GLOBUS SPIRIT
CELESTIAL LAB
ANDHRA BANK
CENTRAL BANK
Keep strict stop loss for large cap stocks, and book profits.
BEARS GETTING STRONG a 'Sign Of Bad Omen'
Thanks
Vasant Bele
All the views expressed are personal, invest after consulting your expert.
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