Nifty Outlook for 19th October 2010

Yesterday, on the Daily Charts NIFTY made a Hanging Man Candlestick Pattern. The hanging man is a bearish reversal pattern. It signals a market top or a resistance level. Since it is seen after an advance, a Bearish Hanging Man Pattern signals that selling pressure is starting to increase. The low of the long lower shadow indicates that the sellers pushed the markets lower during the session. Even though the bulls regained their footing and drove prices higher by the finish, the appearance of this selling pressure after a rally is a serious warning signal. After the first day of Pre Open Session, NIFTY had a muted opening of almost 15-20 points with the negative bias. Selling Pressure in majority of the Sectors like METALS, IT, CAPITAL GOODS, REALTY & INFRA and BANKING & FINANCE was witnessed. In the first half of the session, NIFTY made a low of 5985.10, after breaching the strong support level of 6000. After touching the day’s low, it bounced back to the levels of 6075.95 with IT, REALTY & INFRA, METALS and BANKING & FINANCE bouncing from the day’s low. Call Option A good profit booking was witnessed in the markets. Finally for the day NIFTY closed at 6075.95.  

Purely Stock Specific and Sector Specific actions will be witnessed now as the Results Season has begun. BAJAJ-AUTO, BAJAJHLDNG, CONCOR, HCLTECH, HDFCBANK & POLARIS will be announcing their results today.

A good set of economic data are going to be announced all over the globe tomorrow. Current Account and Construction Output for the month of August will be announced by European Monetary Union, Housing Starts and Building Permits for the month of September will be announced in US. Traders are suggested to follow very cautious approach by following Strict Stop Losses in Intraday Trading.

NIFTY has moved much above its 50-Days SMA (Simple Moving Average) 5770.21 and the 20-Days EMA (Exponential Moving Average) of 6048.19. NIFTY is continuously showing good strength, and in the long term may also cross its previous life time high of 6357. On the flip side, the levels of 6000/5950 are acting as strong support levels.

20-Days EMA (Exponential Moving Average) has maintained above the 50-Days SMA (Simple Moving Average), supporting the recent positive move. MACD (Moving Average Convergence Divergence) has also maintained the positive trend. But at the same time, RSI (Relative Strength Index) reverted from the overbought zone. Traders are suggested to trade cautiously in the markets, as markets have surpassed all the major resistances and have entered in the Over Bought Zone.

For the day, intraday resistance for NIFTY comes at 6095 / 6120 / 6150 levels. At the same time, 6030 / 6000 / 5985 will act as major intraday support levels.

What does Indicators Say?

1. RSI (14 Days & 9 Days): The values are 56.39 and 65.25, respectively.
2. MACD (26 Days & 12 Days): Their Values are 100.55 and 128.91, respectively. a positive crossover is indicated by both the Moving Averages.
3. +DI: 27.44, -DI: 22.15, ADX: 43.11: The Positive Directional Index has gained strength over the Negative Directional Index and also the Average Directional Index is above 20, indicating the development of strength in the current trend.
4. SMA (50 Days) & EMA (20 Days): The values of these two indicators are 5770.21 and 6048.19.

Pre - Market Calls:

JINDALSAW        Buy only if it trades above 221 for the Targets of 225 & 227, with the strict Stop Loss of 217.

PIRHEALTH         Buy only if it trades above 536 for the Targets of 545 & 550, with the strict Stop Loss of 527.

CROMPGREAV   Sell only if it trades below 304 for the Targets of 296 & 292, with the strict Stop Loss of 311.