Bears relentless, 89-week EMA last hope for the bulls - Angel Broking

The opening session of the month started off on a quiet note, in-line with mixed global cues. As expected, the bellwether indices - Sensex and Nifty, bounced towards the mentioned resistance level of 19094 / 5766 during the earlier part of the week. Despite a valiant effort, the bulls however were unsuccessful in crossing the stiff resistance level of the '20-day EMA'. During the second half of the week, indices slumped on the back of immense selling pressure in some index heavyweights. This led the indices to even break the crucial support level of 18525 / 5600 and test November 2012 lows (although the Sensex is yet to test November 2012 lows). The negativity stayed in the market until the last trade of the week.FMCG, Banking and IT counters ended the week on a negative note; whereas Oil & Gas and Healthcare stocks outperformed the benchmark indices. The Sensex and the Nifty shed 2.05% and 2.28%, respectively, over the previous week's closing.

The '20-week EMA' and the '20-day EMA' are placed at 19094 / 5777 and 18941 / 5717 levels, respectively.

The '89-week EMA' and the '200-day SMA' are placed at 18200 / 5500 and 18556 / 5640, respectively.

The 'Lower Top - Lower Bottom' formation on the weekly chart is still intact.

The bulls finally had to surrender this week, as the benchmark indices gave a weekly closing below the psychological level of 18500 / 5600, which is for the first time after November 16, 2012's weekly candle. Indices are now approaching the next support level at the weekly '89-EMA' placed around 18200 / 5500 level. The momentum oscillators on the daily charts are extremely oversold and the possibility of a bounce thus cannot be ruled out. However, one must remember that to time the bounce will be difficult; traders looking to initiating long positions should wait for the indices to cross the Friday's high of 18525 / 5577. Only a sustainable move beyond this level may push markets higher to test the next resistance levels placed at 18727 - 18960 / 5645 - 5720. On the other hand the 'Lower Top - Lower Bottom' formation on the weekly chart is still intact and the momentum on the down side is quite strong. The charts of global markets too appear weak and may add on to the prevailing negative sentiment. A fall below 18200 / 5500 may reinforce selling pressure in the market. In this scenario, we may witness a continuation of the concluded week's pessimism, possibly leading indices to slide towards 17976 / 5441 levels, or even further down. We advise traders to stay light on the positions and follow strict stop losses. Initiating fresh short positions on the index at current levels is not recommended as the risk - reward ratio is not favorable and may incur losses.

Source : Equity Bulls

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