Weekly Nifty For 08th July- 12th July 2013

               The market movement for the week can be classified as extremely choppy and volatile. Nifty went up only by 25 points on a weekly basis. The market took support just above the Bullish Breakaway Gap made in the last week i.e. between Sensex 19093-18925 and Nifty 5749-5699. Sensex bounced from a low of 19147 and Nifty from 5760. While the market continues to retrace the fall from Sensex 20443 to 18467 and Nifty 6229 to 5566, the intermediate minor bottom formed this week, coupled with the Bullish Breakaway Gap will provide strong support to the market in the short term. The long term as well as the short term trend has turned positive while the medium term trend still remains down.

             Our markets in the previous week witnessed increased volatility to finally end the week higher by 0.6%. The international equity markets too remained volatile, European markets reacted positively to the statements emerging out of the ECB and the BOE, wherein both the central banks despite not reducing benchmark rates reiterated that interest rates would continue to remain low for a sustained period of time. The FTSE ended the week higher by 3.6%, while the CAC and DAX ended the week higher by 1.4% and 0.2%, respectively. The Nikkei on the other hand ended the week higher by 4.1%, while the Shanghai Composite managed to recover some lost ground to end higher by 2.1% in the trade. On the domestic macro front, the HSBC manufacturing PMI stood at 50.3 for the month of June vs a prior month figure of 50.1, while the services PMI stood at 51.7 vs a prior month figure of 53.6. The core sector growth for the month of May stood at 2.3% vs a prior month figure of 2.4%.

Both the indices have formed a small black body on the daily charts but that is after a bullish gap up. Hence it indicates a continuation of the ongoing bullishness.  Both Sensex and Nifty have formed a small white body candle on the weekly charts which comes on the back of the Bullish Engulfing pattern witnessed last week. A bigger white body would have confirmed the bullish pattern but the small white body can be termed a continuation of the bullishness.

               Two weeks back both the indices left behind a Bullish Rising gap between Sensex 19093-18925 and Nifty 5749-5699. This gap acted as a support this week as the Sensex and Nifty bounced from just above this gap; Sensex bounced from 19147 and Nifty from 5760. This gap marks the beginning of a bull rally and hence it can be termed as a Bullish Breakaway gap. Also this gap completed 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.

This week both the indices have managed to stay and close above the short term average of 20dma (Sensex – 19101 and Nifty – 5764) and also above the long term average of 200dma (Sensex – 19232 and Nifty – 5831). However, both the indices continue to remain below the medium term average of 50dma (Sensex – 19557 and Nifty – 5923). Thus the trend in the long term and short term timeframe continues to be up, whereas the trend in the medium term timeframe continues to remain down.

              MACD and ROC both continue with their Buy signals; MACD being in the negative whereas the ROC continues in the positive zone. RSI continues to remain above the equilibrium line, indicating bullish momentum. Stochastic Oscillator continues in Sell mode.  The Sell signal for the Bollinger band given four weeks back stands negated as the prices have closed above the mean of 20dma. ADX has fallen further to 20 suggesting that the current trend has lost all of its strength. OBV too has started moving higher forming higher top higher bottom formation. Thus majority of the Oscillators are suggesting continuation of short term bullishness.

                 The Nifty O.I. PCR has improved to 1.39. For the current month series, highest Open interest build up is seen at 5600 Put and 6000 Call. This suggests that the market support at 5600 levels and resistance around 6000 levels. Lot of Put writing was seen at the strike of 5800 on Friday, which suggests immediate support around that level.