Weekly Closing below psychological 5700 level in Nifty - Angel Broking

On Friday, once again our markets opened on a flat note inline with mixed global cues. However, indices traded with extreme high volatility to close near the initial opening level. Consumer Durables, Realty and IT counters were among the major losers whereas Power and Metal stocks ended with marginal gains. The advance to decline ratio was strongly in favor of declining counters (A=984 D=1882) (Source– www.bseindia.com)

- The '20-day EMA' and the '20-week EMA' are placed at 19216 / 5806 and 19195 / 5813 levels, respectively.

- The '200 Day SMA' is placed at 18526 / 5618.

- The 'Lower Top Lower Bottom' formation on weekly chart is confirmed for the first time after January 14, 2011.

- We are witnessing a 'Downward Sloping' trend line support drawn by joining the lows of December 18, 2012 and March 04, 2013.

During the week, the uncertainty on the domestic front has dampened market sentiments. This resulted in weekly closing below the psychological level of 5700 in Nifty after nearly four months. This price action has now confirmed a 'Lower Top Lower Bottom' formation for the first time after January 14, 2011 and indicates a probability of intermediate downtrend in the market. On the other hand, looking at the daily chart, it is clearly seen that indices are precisely trading at the 'Downward Sloping Trend Line' support level. This trend line is drawn by joining two significant lows of 19149 / 5823 (low of December 18, 2012) and 18760 / 5663 (low of March 04, 2013). In addition, the '200-day SMA' is also placed around 18525 / 5620 level (the 200-day SMA level of Nifty precisely coincides with the trend line support; whereas in Sensex it is marginally lower). Considering these contra evidences, we are of the opinion that if indices close below 18525 / 5600 then we may witness continuation of the downtrend in coming weeks. In such a scenario, indices may test 18255 – 17800 / 5548 – 5441 levels.

We specifically would advise traders not to initiate fresh short positions for this down leg. On the flipside, the daily chart now depicts a 'Spinning Top' Japanese candlestick pattern. The said pattern will be confirmed once indices close above Friday's high of 18860 / 5692. This is also supported by the extreme oversold condition of daily 'Stochastic' momentum oscillator. Hence, in such a scenario, indices may bounce towards 19083 – 19240 / 5758 – 5820 levels. The coming week is likely to trade with high volatility on account of March month derivative expiry. Moreover, the weekly closing can be very crucial as it will also provide a closing for the Quarterly charts.

Source : Equity Bulls

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