Bulls defend 6200; but ambiguity of trend continues - Angel Broking

The week commenced with the bellwether indices - the Sensex and the Nifty trading slightly higher; but eventually, they posted a negative closing for the opening session. The losses were negligible and the intraday movement was too lethargic. Similar price action repeated during the following two trading sessions. The daily volume activity was very low during all these trading sessions. On Thursday, during the first half, the Nifty surged, but failed to sustain itself as the bears struck back and dragged it substantially lower from early morning highs of the day. This was followed by a gap-down opening on Friday but modest recovery towards the fag end of the session pulled the index well above the psychological mark of 6200. The Oil & Gas, Capital Goods, Banking and Power conglomerates were among the major culprits for the week; whereas the IT, Teck and Healthcare sectors outperformed the broader Nifty. Banking was the only sector which closed in the negative territory. The Sensex and the Nifty trimmed by 1.61% and 1.63%, respectively, over the previous week's closing.

Pattern formation:

- The '89-day EMA' and the '89-week EMA' are placed at 20463 / 6089 and 19257 / 5777 levels, respectively.

- The '20-day EMA' and the '20-week EMA' are placed at 20957 / 6240 and 20446 / 6085 levels, respectively.

- The 'Bearish Engulfing' Japanese candlestick pattern on the weekly chart is still intact.

- The daily momentum oscillators are now showing a negative crossover.

- On the daily chart, the 'Upward Sloping Trendline' is placed around 6170.

Future outlook

The first week of the new calendar year 2014 ended in favor of the bears, courtesy, a single trading session. At the current juncture, the daily momentum oscillators do not bode well for the bulls. A sustainable move below 6170 would result in a trendline breakdown and would indicate further weakness in the market. In this scenario, the Nifty may slide towards the strong support zone of 6090 (daily '89 EMA') or may even test the 5970 (crucial swing low of November 13, 2013) level. On the flipside, this week's high of 6358 would now act as a strong resistance for the index. Only a sustainable move beyond this level would open up the possibilities of re-testing the new all time high of 6415. We advise traders to trade with strict stop losses and avoid taking undue risks. We recommend traders to consider long positions within the IT and Pharmaceutical pack and exit long positions in Banking, Auto and Capital Goods counters.

Source : Equity Bulls

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