Weekly Nifty For 1st July- 5 July 2013

            The Indian market, reversing the trend on the last day of June series, started moving northwards. Reforms in the Energy sector by the government by agreeing to increase natural gas prices and setting up a panel recommending the linking of gas prices to global benchmark further supported the market sentiments. BSE Sensex closed at 19396, noting w-o-w gain of 622 points, while NSE Nifty was up 175 points to 5842 levels. FII’s sold worth Rs 72.3 bn in Indian market, while DII’s bought to the tune of Rs 7.4 bn. India’s current account deficit hit a record high 4.8% of gross domestic product in the fiscal year that ended in March, fuelled by rising imports of oil and gold.
           The fiscal deficit for the month of May stands reduced from Rs 936.12 bn to Rs 870.79 bn. Globally, the US durables goods order for the month of May stood at 3.6% vs consensus estimates of 3.0%. Its Q1CY13 GDP growth was revised lower to 1.8% vs consensus estimates of 2.4%.

              On expected lines, the rising trendline support area near 5600 turned out to be supportive and on the price momentum saw the prices flaring up to move for the recent swing high levels near 5850. The weekly candle formed would be labeled as a “bullish engulfing” candle which signals a likely reversal of the downtrend. Besides, as the formation of the candle comes at the trendline support it assumes special significance. 

                Both the indices have left behind a Bullish Rising gap between Sensex 19093-18925 and Nifty 5749-5699 due to the gap up opening on Friday. This gap should act as a support when required. This gap marks the beginning of a bull rally and hence it can be termed as a Bullish Breakaway gap. Also this gap now completes a Bullish Island Reversal pattern on the daily charts. This is the second time a Bullish Island formation has occurred in the last one month. One can buy with a stop loss of Sensex 18467 and Nifty 5566.

                MACD and ROC have both given fresh Buy signals on Friday. RSI (53) too has given a fresh Buy on Friday when it went above the equilibrium line. Stochastic Oscillator continues in Buy mode as %K (42) is above %D. MFI has increased but is still below the centerline and hence continues with its Sell signal. The Sell signal for the Bollinger band given three weeks back stands negated as the prices have closed above the mean of 20dma. ADX continues to remain at a reduced to a level of 23, suggesting the current trend has almost all of its strength. The Directional Indicators have given a fresh Buy signal on Friday when +DI went above –DI. OBV too has started moving higher forming higher tops higher bottom formation. Thus majority of the Oscillators have reversed and turned bullish, suggesting short term bullishness.

                  The Nifty O.I. PCR has improved to 1.37. For the July series, highest Open interest build up is seen at 5600 Put and 6000 Call. This suggests that the market expects a trading range with support at 5600 and resistance around 6000 levels. Lot of Put writing was seen at the strike of 5800 on Friday, which suggests immediate support.

                     A pullback rally may target 5930/5970. Considering the strong gapping up action noted post June series expiry, it would be prudent for positional traders to wait for corrective dips. The index is expected to oscillate between the 5930-5700 levels for the coming week. Supports would be pegged at 5750 and 5700, while resistance would be 5870 and 5930.