GLOBAL CUES WEAKEN SENTIMENTS-17/01/2008
Please note that this article is written on Thursday because of the Informed Investor Exhibition starting from Friday. So all rates are Thursday’s closing rate.
The global weakness continued and the Indian markets finally fell prey to it. The great decoupling theory took a back seat and the Indian markets caved in to the selling pressure from the FII’s and local investors, who sold in order to invest in the IPOs currently on. The selling pressure was so much that after a long time the Sensex and Nifty have closed below crucial levels. It is imperative that the market is able to close above the crucial 50 DMA, which is currently placed at 5932 for the Nifty and 19777 for the Sensex, immediately or the correction will deepen. RELIANCE POWER TAKES AWAY SECONDARY MARKET POWER.
Unprecedent hurry to subscribe for the Rel Power IPO saw retail investors and traders selling in the secondary market, in order to commit funds for the Rel Power IPO. Also the fact that the grey market premium is quoted well above Rs.450, is making banks to open new demat accounts like never before in the history of the stock market. Also Biyani’s Future Capital got hugely over subscribed. GLOBAL WEAKNESS A MAJOR CONCERN.
Globally things have been terrible to say the least. The data coming out of the U.S. continues to push the economy into recession and now may be the FED Chief may be forced to cut interest rates by more than 50 bps. Every passing day, the US markets are selling off and that does not help in the sentiment of our market. US market is already in a bear phase. SENSEX, NIFTY CRITICAL LEVELS BREACHED. For the first time since last August when the Sensex took support at 13779, which was the 200 DMA and from then on, it made higher top and bottom formation. The Sensex, used to take support at the 50 DMA and bounce back but now both Sensex and Nifty have breached the 50 DMA and has closed below that. If it trades below this level, then the chances are that both Sensex and Nifty may go on to test the 200 DMA, which is 16500 for the Sensex and 4850 for the Nifty. The trendline, which acted as a strong support in the last two falls has now been breached for the Nifty and the Sensex has just taken the support at that level. It should hold on or else we may have to look for a broader correction. It is advisable to lighten your long position if the Sensex and Nifty are not able to close above 19777 and 5932 immediately. SENSEX.
Sensex opened the week at 20918, made a high of 20985, low of 19513 and closed Thursday at 19700. The weekly loss until Thursday for the Sensex was pegged at 1127 points. But the Sensex has closed below the 50 DMA which is placed at 19777 and that is not comforting. Still one day can be given for the Sensex to recover and close above it. The trendline, which provided fantastic support during the previous falls, is now just able to hold. The trendline support is 19676 and the Sensex must not close below that or else we will have to look at broader correction ranging from 17171 to 21206. The correction levels for that are placed at 19665-19188-18712. If the Sensex breaches the trendline support and the 50 DMA, then we are surely headed for lower levels and may be even test the 200 DMA which is around 16500. So it is imperative that the Sensex closes above the support levels. The MACD indicator is pointing southwards but is still in the positive territory. There is another trendline support at 19171 and which is coinciding with the correction level placed at 19188. So for the week ahead the support is at 19513-19188-18712. Resistance is at 19914-20122-20359. NIFTY.
Nifty opened the week at 6208, made a high of 6260, low of 5825 and closed at 5913 on Thursday. The weekly loss for the Nifty was 287 points. The Nifty has closed below the 50 DMA, which was at 5932 and below the trendline support at 5977. This certainly does not augur well for the market. The Nifty, if it breaks the low of 5825 which it made on Wednesday, then we will have to look for a broader correction from5000 to 6357 and the correction levels are placed at 5839-5678-5518. The series of higher bottom will be broken when the Nifty breaks 5676 and then the market may get panicky, so please reduce your long positions. The indicators are also not able to instill any confidence in the market. The Nifty has to close above 5977, if there is any chance of a recovery. The trendline support is at 5876 and 5550. The Nifty suppose does not break the low of 5825 and stages a recovery, then it has to close above 6154 for the uptrend to resume and one can safely assume the correction to over. So for the week ahead support is at 5876-5825-5676-5550. Resistance is at 5977-6028-6091-6154. WATCH OUT ASIAN ELECTRONICS 551 & JAIN IRRIGATION 645. Asian Electronics 551 has formed a very bullish consolidation pattern and is now on the verge of a serious upmove, which can take it all the way upto702-807. The target will be achieved as long it stays above 468. Jain Irrigation 645, has strong support at 600 and is now on the way to test 878 and 975 levels in the medium term. Buying is advised on declines. LAST WEEK’S RECOMMENDATIONS: Once again 100 %, all the scripts reached their targets. Our readers are happy. THIS WEEK’S RECOMMENDATIONS: SHIVVANI OIL 693 SL 665 TGT 752-781-805. LIC HOUSING 383 SL 372 TGT 391-403-443. WELSPUN GUJ. 528 SL 507 TGT 553-576. EDUCOMP 5529 SL 5350 TGT 5724-5816-5930. BHARAT FORGE 367 SL 349 TGT 376-389.
PRITHVI INFO 334 SL 318 TGT 354-392.