Archives : EURO CRISIS TO CONTINUE - 04/06/2010.
EURO CRISIS TO CONTINUE – 04/06/2010.
  

The market is behaving like a drunken man as it keeps on swinging wildly due to the volatility in the global market. Our market is taking cues from the global market as it continues its irrational behaviour by going up by 1-2% and by crashing down 1-2% the next day. The correlation just keeps on increasing with each passing day.

 

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EURO CRISIS TO CONTINUE – 04/06/2010.
  

The market is behaving like a drunken man as it keeps on swinging wildly due to the volatility in the global market. Our market is taking cues from the global market as it continues its irrational behaviour by going up by 1-2% and by crashing down 1-2% the next day. The correlation just keeps on increasing with each passing day.

 

The Euro crisis made sure that the market breached the 200dma and closed below that on Tuesday. Just when it seemed that the market will continue with its correction, the global markets rallied and our market took good positive cues and started a fresh rally. Not only was our market able to close above the 200dma but sustained and breached even the 100dma. Now the test of the market will at the 50dma (Sensex – 17255 and Nifty – 5172), which incidentally coincides with strong Trendline resistance (Sensex – 17190 and Nifty – 5177), and the 61.8% retracement (Sensex – 17250 and Nifty – 5165) of the previous fall.

 

Just when our market was getting on track on the back of three successive bullish days, the global markets now seem to be turning down. The crisis now seems to be spreading across Europe. So one can argue the upmove may be over and our market will follow global cues. If the 200dma (Sensex – 16804 and Nifty – 5014) is breached, then the projected levels of correction will be 16302-16107-15858 for the Sensex and 4903-4848-4770 for the Nifty.

 
TECHNICALLY SPEAKING.
 

The Sensex opened the week at 16873, made a high of 17150, a low of 16318 and closed the week at 17117. The Sensex gained 254 points on a weekly basis. Similarly Nifty opened the week at 5076, made a high of 5147, a low of 4961 and closed the week at 5315. The Nifty too closed with the week with a gain of 69 points.

 

On the weekly charts both Sensex and Nifty have formed a white body candle with a long lower shadow which indicates a pull-back from lower levels. On the daily charts both the indices have once again formed a Three White Soldiers pattern.

 

Both MACD and ROC have given Buy signal and are moving up. The OBV too has given a Buy signal along with RSI and MFI. Only the Directional Indicators continue in their Sell mode but the –DI is now converging towards the +DI which is positive if it continues. The Stochastic Oscillator, even though has given a Buy, is now moving in the overbought zone. Hence there is a need to remain cautious.

 

In its rebound, both Sensex and Nifty have closed above the 50% correction mark (Sensex – 17003 and Nifty – 5092) and are on its way to test the 61.8% mark (Sensex – 17250 and Nifty – 5165). This level coincides with the 50dma (Sensex – 17255 and Nifty – 5172) and trendline resistance (Sensex – 17190 and Nifty – 5177). Hence one can expect strong resistance zone between 17190-17255 for the Sensex and 5165-5177 for the Nifty. The current rally needs a close above these resistance zones to test the previous top (Sensex – 18047 and Nifty - 5399).

 

From slightly longer term view we are looking at the correction of Sensex rise from 13219 to 18047 and the correction levels are 16203-15633-15063. Similarly one has to consider the Nifty rise from 3918 to 5399 and for that the correction levels are 4833-4659-4484. Both Sensex and Nifty corrected more than 38.2% correction level before bouncing back two weeks before; Sensex bounced back from 15960 and Nifty from 4786. On an immediate front, the projections for the correction will be Sensex 16352-16107-15858 and Nifty 4913-4840-4770.

 

Nifty OI PCR is quite heavy 1.63 suggesting that the market is nearing its upper side of its trading range. Strong Put writing is seen at strikes of 5000 and 4900, which should acts as strong supports in case of a downfall. Call writing is seen at 5200 strike which should act as a resistance.

 

Sensex has strong Trendline resistance at 17190 and Support at 16329-16043.

 

Nifty has strong Trendline resistance at 5177 and Support at 4900-4841.

 

For the week ahead, Sensex will find Support at 16808-16577-16318 and will find Resistance at 17276-17493-17676.

 

For the week ahead, Nifty will find Support at 5047-4966-4908 and will find Resistance at 5177-5235-5294.

  
INDEX LEVELS:
  
 S3S2S1CLOSER1R2R3
Nifty4908496650475135517752355294
Sensex16318165771680817117172761749317676
     
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