Budget blues and the bear trap - Angel Broking

The week commenced on a muted note, in-line with mixed global cues. On Monday, the opening trading session, the bellwether indices, Sensex and Nifty, somehow managed to hold the crucial support level of 19149 / 5823, but they eventually failed on Tuesday and tested the 18973 / 5777 mark. Later during the week, on the Budget day, the market traded with immense volatility in the first half, wherein the indices went higher to test 19323 / 5850. This level coincides with the '89-day EMA' and hence, acted as a strong resistance for the market. Post the mid-session, the indices took a nosedive on account of an unenthusiastic Budget and almost met our target of 18600 / 5650, mentioned in the previous report. During the week, the Realty, Oil & Gas, Banking and Metal counters experienced massive selling pressure; whereas the IT and Consumer Durables sectors managed to outperform the benchmark indices. The Sensex and the Nifty shed 2.06% and 2.23% during the week to settle at 18919 and 5720 respectively. However, individual mid-cap and small-cap stocks continued to fall and closed with significant losses.

The '20-day EMA' and the '20-week EMA' are placed at 19372 / 5863 and 19175 / 5813 levels, respectively.

The monthly chart exhibits a 'Bearish Engulfing' pattern.

The monthly momentum oscillators are signaling a negative crossover.

The level of the weekly 'RSI' momentum oscillator has now dropped below the 50 mark.

Indices have closed marginally above the 'Downward Sloping Trend Line', drawn by joining two significant highs of 21109 / 6339 (high of November 05, 2010 weekly candle) and 19137 / 5816 (high of October 05, 2012 weekly candle).

For the sixth consecutive week, our benchmark indices have closed in the negative territory. As mentioned in our January 25, 2013 weekly report, the bearish impact of the 'Hanging Man' (at market top) Japanese candlestick pattern is now clearly seen. Indices have now finally broken down below the 19149 / 5823 mark, which has been acting as a crucial support level. This level also coincides with the '89-day EMA' and the '20-week EMA'. Since the February month is over, the monthly chart now depicts a 'Bearish Engulfing' pattern. This pattern has a bearish implication but needs a confirmation. In addition, the monthly momentum oscillators are signaling a negative crossover. Also, the weekly 'RSI' momentum oscillator has now sneaked below the 50 mark. RSI level dropping below 50 from the upside is an additional sign of caution for the bulls. On the contrary, indices have now precisely closed above the support level of the 'Downward Sloping Trend Line' (please refer exhibit 1). Hence, the impact of all the above mentioned negative technical evidences would be seen once indices sustain below this week's low of 18793 / 5671. In this scenario, indices are likely to fall towards 18450 - 18255 / 5600 - 5548 levels. On the flip-side, this week's high of 19412 / 5879 would now act as a crucial resistance in the coming week. Only a move beyond this level may nullify the impact of negative technical evidences. With such a move the markets may rally towards 19768 - 19865 / 5991 - 6025 levels.

Source : Equity Bulls

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