Rajan Effect - Bulls in cruise control - Angel Broking

The week started off on an optimistic note in-line with cheerful trading mood across the globe. However, the very next day, bears tried to re-enter the market as we witnessed a sharp cut of nearly four percent during the session. This was mainly on the back of ongoing weakness in Indian Rupee (INR). This was followed by a strong positive session as the bulls managed to defend the 5300 mark and closed well inside the positive territory. Unlike most new appointees, RBI Governor, Raghuram Rajan made a grand opening with a slew of measures to boost the economy and as a result, we witnessed massive gap up opening on Thursday's session. This optimism continued on Friday as well to conclude the week on a high note. The Banking counters single handedly propelled the rally along with the Capital Goods, Oil & Gas and Metal stocks. However, the IT sector ended in the negative territory on the back of meaningful appreciation in the Indian Rupee (INR) during the second half. The Sensex and the Nifty ended the week with enormous gain of 3.49% and 3.81%, respectively, over the previous week's closing.

- The '89-day EMA' and the '89-week EMA' are placed at 19124 / 5715 and 18624/ 5615 levels, respectively.

- The '20-day EMA' and the '20-week EMA' are placed at 18715 / 5522 and 19192/ 5737 levels, respectively.

- The monthly 'RSI-Smoothened' oscillator is negatively poised; whereas the weekly momentum oscillators are contradictory and signaling a positive crossover.

- The 61.8% and 78.6% Fibonacci retracement levels of the fall from 6094 (high on July 23, 2013) and 5317 (low on August 28, 2013) are placed at 5730 and 5890, respectively.

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

Finally, the bulls had something to cheer as the index experienced a sustainable bounce on four out five trading sessions. Despite sharp correction on Tuesday, the bulls managed to hold their winning streak. The move beyond 5529 has resulted in the confirmation of the 'Bullish Hammer' formation in the weekly chart. Also, the momentum oscillators on the daily and weekly chart are positively poised. Thus, going forward, we are of the opinion that if the index sustains above 5689 level, then the market is likely to move towards 5720 - 5750 levels. This resistance zone coincides with the 61.8% Fibonacci retracement level of the fall from 6094 (high on July 23, 2013) and 5317 (low on August 28, 2013). Most market participants expect that the Syria conflict may have a negative effect on Equity markets. In case that event risk is averted then we may see an extended move beyond 5750. In such case, a rally towards the 78.6% Fibonacci retracement level of 5890 may be seen. However, the overall weekly trend remains bearish as the 'Lower Top Lower Bottom' formation is still intact and hence, the current rally can be construed as a pull back. How long will this pullback extend is something that cannot be predicted precisely. Hence, we advise traders to start booking profits as the market move higher and remain light on positions. Banking, Oil and gas and Capital goods counters are likely to perform in the coming week. Traders are advised to stay away from IT and Pharmaceutical counters as they may witness profit booking in the days to come.

Source : Equity Bulls

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