Weekly Nifty For 28th April- 2nd May 2014

             This week the market move has been a  roller coaster ride, with markets hitting the all time high 6870 on expiry and then closing below the weekly opening at 6782. Historically May is considered a bearish month with the famous saying "Sell In May And Go Away". The India VIX is already at three year high and is likely to continue its journey north. So a traditionally turbulent month with high volatility calls in for a cautious trading strategies. The sensitive situation with Ukraine is also a cause of concern for the market.

             Nifty opened the week at 6789, made a high of 6869, low of 6772 and closed the week at 6782. Thus the Nifty closed the week with a small gain of just 3 points. On the daily charts Nifty have formed a Bearish Engulfing pattern which is a bearish reversal pattern occurring at the top. A bearish candle on monday will further strengthen the reversal. On the weekly charts, Nifty has formed a Shooting star (small body) formation with long upper shadow, indicating selling pressure at higher levels. Thus both daily as well as weekly charts suggest a short term bearish bias.

             The Fibonacci retracement of the move from 6432 to 6869 has support at 6702-6651-6599. The 50% Retracement level coincides with the intermediate bottoms at 6665 & 6650. Thus the market has a strong Support Zone between 6665-6650. If and when this support zone is breached conclusively the correction of higher degree i.e. of the move 5933 to 6869 will start.

             Nifty has completed a Bullish Flag pattern when Nifty closed above 6562. The pattern has a potential targets lies at 6915 and 7190. These targets remain valid till Nifty trades above the intermediate low of 6432. The market has a Bullish Upward Gap at 6413-6403. This Bullish Gap has been tested when the markets moved from 6432 to 6869. Thus on any correction this gap will act as strong support. As per the Gap theory this Measuring Gap provides the target of 6886, Which has been more or less been achieved this week. The market has completed a six year consolidation on the monthly charts. The potential target of this pattern at 10480 remains valid till 6350 is not breached conclusively. On the long term investing front the market is buy on dips. This rally started from a low of 5933 and hence this bullish rally remains valid till the market stays above the 5933 levels.

                 Nifty has been trading above the short term average of 20dma (6732), the medium term average of 50dma (6476) and the long term average of 200dma (6115). The 20DMA was tested last week so it is likely to be provide some support this week as well. Thus the trend in the short term, medium term and the long term time frame continues to remain bullish.

                 RSI @61 has reduced slightly but still suggests Bullish momentum. MFI @49 has dropped centerline and hence suggests money flow out of the market. Stochastic Oscillator is in Sell mode as %K is below %D. ADX @37 has reduced slightly indicates that the uptrend might be consolidating. The Directional Indicators continue in Buy mode as +DI continues to remain above -DI. OBV continues in Buy mode. The market continue with their Buy signal on Bollinger Band. Some of the Oscillators have turned bearish and some are showing negative divergence, So the trader should trade cautiously and start booking profits.

                Open Interest Put Call Ratio for the May series is at a reduced level of 1.04 which indicates a balance for call & put. Highest Open interest build up is seen at 7000 Call and 6500 Put. Thus the market expects a trading range with support at 6500 levels and resistance around 7000 levels. The May rollover has been lowest in past three months at 60%. 

Stock of the Week:

Ambuja Cements

 

The Stock has been moving in an uptrend since hitting the bottom of 150, in a perfect rising channel. This channel on the weekly charts has been broken. The potential target for this is at 190 with a stop loss of 218. On the RSI charts a double top break down can be seen, which further confirms the bearishness. The stock can be sold till the levels of 213 for the targets of 200-194-190.