weekly nifty for 12th August- 16th august 2013

              Poor performance by corporates in quarterly results, commodity exchange dilemma and weakening rupee kept market sentiments downbeat with major market indices losing their strengths. BSE Sensex lost over 500 basis points in intraday on August 6. Rupee took a breather post announcement of Raghuram Rajan as the successor of RBI Governor D Subbarao, but remained volatile during the week. FDI for April-May reported 24.2% growth, however, the HSBC manufacturing PMI and service PMI contracted 4 years and 20 months, respectively, reflecting a poor performance of composite PMI which contracted to 48.4 points in July from 50.9 points in June, indicating weak economic conditions. A pull back rally was observed on Thursday with BSE Sensex closing high by 124 points to 18789 and NSE Nifty up by 46 points to 5566 levels, however on w-o-w basis, both indices lost 375 points and 112 points, respectively. During the week, FIIs took exposure to the tune of Rs 12.3 bn, while DIIs sold to the tune of Rs 4.7 bn. Globally, German industrial production rose in June, adding to signs that growth in Europe’s largest economy accelerated in the second quarter. Consumer borrowing in the US climbed in June after the biggest gain in three months as lenders responded to a pickup in auto sales and employment index in US rose in July by most in five months. UK services growth accelerated to 60.2 in July from 56.9 in June, the highest since December 2006.

              Sensex opened the week at 19178, made a high of 19306, low of 18551 and closed the week at 18789. Thus it registered a weekly loss of 375 points. At the same time the Nifty opened the week at 5682, made a high of 5721, low of 5486 and closed the week at 5565. Thus the Nifty went down by 112 points on a weekly basis. On the daily charts, Nifty has formed a Bullish Engulfing pattern if we consider the last two day candles. However Sensex has failed to do so. Hence we will require a confirmation in the form of a real white body candle formation on Monday, which will signal a short term trend reversal. There is a Bearish Black body candle on the weekly charts; if we consider the last three weeks formation, then a Bearish Three Black Crows formation has been completed. This is a Bearish pattern which means that the trend in slightly higher timeframe continues to remain bearish. Hence Bears are likely to build short positions on every increment.

             Currently both the indices have managed to rise after making lows of Sensex 18551 and Nifty 5486. As long as the indices continue to remain above these levels, the market will experience a minor pull-back. The market tested the most important Bullish Rising Gap between Sensex 18284-18062 and Nifty 5526-5447. Nifty managed to bounce back after making an intra-week low of 5486 inside the gap and closed the week above this gap, whereas the Sensex bounced from18551 which was above this gap. Market has managed to bounce back number of times from above this Gap but a breach of this gap will signal the end of the long term rally.

            This week both the indices have remained below the short term average of 20dma (Sensex – 19615 and Nifty – 5848), the medium term average of 50dma (Sensex – 19390 and Nifty – 5825) and the long term average of 200dma (Sensex – 19339 and Nifty – 5851). Thus the trend in the short term, medium term and long term timeframe continue to remain bearish.

             MACD and ROC both are negative and continue with their Sell signal. RSI (32) continues in Sell mode suggesting high bearish momentum. Stochastic Oscillator has signaled a fresh Buy in oversold condition as %K (07) has gone above %D. MFI (21) has remained below the equilibrium line which suggests money flowing out of the market. ADX has improved and is above 23 suggesting that the current trend is now gathering strength. The Directional Indicators continue with its Sell signal as -DI is above +DI. OBV continues to make lower top lower bottom formation and hence it remains in its Sell mode. On Tuesday, both the Sensex and Nifty closed below the lower Bollinger band, signaling a Sell. Thus majority of the Oscillators points towards bearishness to continue in the near term.

           The Nifty O.I. PCR has reduced and is now at 0.93. For the current month series, highest Open interest build up is seen at 5400 Put and 6000 Call. This suggests that the market expects a wide trading range with support at 5400 levels and resistance around 6000 levels. Thursday saw high amount of Call writing at 5700 strike which suggests immediate resistance to come in at that level.