Bulls gain momentum - is the rally sustainable? - Angel Broking

The week began on a subdued note on Monday considering quiet trading mood across the globe. After a roller-coaster ride on Monday, the next trading session opened higher on the back of positive announcement by the Reserve Bank of India (RBI) with regards Marginal Standing Facility (MSF) rates. This was followed by a gap down opening on Wednesday; but once again this dip was bought in by the bulls. The concluding session of the week opened a percent higher and closed almost at the highest point of the week considering strong overnight cues from US bourses and the robust 2QFY2014 numbers from IT giant, Infosys. The rally for the week was mainly propelled by the Realty, IT, Banking and Capital Goods counters; whereas the Consumer Durables and Metal sectors ended with nominal losses. During the week, the Sensex and the Nifty posted gains of 3.08% and 3.20%, respectively, over the previous week's closing.

- The '89-day EMA' and the '89-week EMA' are placed at 19462 / 5795 and 18774 / 5649 levels, respectively.

- The '20-day EMA' and the '20-week EMA' are placed at 19879 / 5890 and 19533 / 5820 levels, respectively.

- The monthly 'RSI-Smoothened' oscillator is still negatively poised.

- The 78.60% Fibonacci retracement level of the fall from 6143 (high on September 19, 2013) to 5700 (low on October 01, 2013) is placed at 6046 level.

- Friday's daily candle resembles a bearish 'Hanging Man' Japanese candlestick pattern.

- On the daily chart, we are now observing an 'Upward Sloping Trend Line' drawn by joining 5118 (low on August 28, 2013) and 5700 (low on October 01, 2013).

During the week, the bulls clearly dominated the market and marched on to conquer the 6000 mark. In our previous report, we had clearly mentioned that traders should await a sustainable move either above 6048 or below 5885 levels. On Monday, the Nifty sneaked below 5885 but failed to close below it. On the other hand, the index closed marginally above 6048 levels at the week's closing on Friday. However, considering the current daily candle (Hanging man candlestick formation), we advise traders to adopt a stock specific approach. Going forward, any sustainable move beyond 6143 level would negate all possibilities of near term correction. In this scenario, traders should remain on the long side for the immediate upside levels of 6230 and even 6300 cannot. Also, we have been mentioning a 'Lower Top Lower Bottom' formation on the weekly chart, which has now been unexpectedly negated on a closing basis. On the flipside, the current daily candle does not bode well for the bulls as it resembles a bearish 'Hanging Man' pattern. The said pattern has an extreme negative implication when it occurs at an important resistance. In the current scenario, it is placed slightly above the 78.6% Fibonacci retracement level (6046) of the fall from 6143 (high on September 19, 2013) to 5700 (low on October 01, 2013). The said pattern would be confirmed if the index sustains below Friday's low of 6046. In this scenario, we may expect a correction towards 5979 - 5900 levels. In the extreme bearish scenario, if the index manages to sustain below 5900, then we may witness a break down from the 'Upward Sloping Trend Line' (please refer the exhibit) drawn by joining 5118 (low on August 28, 2013) and 5700 (low on October 01, 2013). This price development may trigger immense pessimism in the market. As a result, the correction may get extended towards 5800 - 5700 levels. The coming week may give a clear indication of the market direction for the intermediate term. The trend decisive levels would be any sustainable move beyond 6143 or a breach of 5900 on a closing basis.

Source : Equity Bulls

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