Nifty Outlook for 31st January 2011

On Friday, NIFTY again made a Black Opening Marubozu Candlestick Pattern, with a long lower shadow. An upside retracement from the level of 4920 to 6388 has been drawn on the chart, in which it can be witnessed that NIFTY has closed even below its 50% retracement level, which signals that the bears have made a strong grip in the markets. Carnage was witnessed specifically in the Mid Cap and Small Cap Sector. NIFTY had a muted Opening of almost 15-20 points with the positive bias and made a high of 5614.40, which was symmetrical to the opening level of 5614. After kissing the day’s high, NIFTY started slipping with BANKING, REALTY & INFRA, TEXTILES, SHIPPING, METALS, SUGAR, FERTILIZER, PHARMA and IT too in the latter half of the session. A brutal selloff was witnessed in the broader markets too. NIFTY started melting since morning and tested its important support level of 5500 thrice, but immediately after breaching it NIFTY dipped almost 130 points to the day’s low of 5459.55. BUYING was almost absent from the markets. REALTY & INFRA Stocks dipped almost 6%-12% for the day, some of them even made their new 52-Week Low. NIFTY for the first time since 06^th September 2010 breached the level of 5500 in intraday by making a low of 5459.55 (almost 130 points in the negative territory) for the day. It may be said that after breaching the important psychological level of 5500, a panic selloff was also witnessed which led to bloodbath in the markets. Finally, for the day NIFTY closed at the levels of 5512.15 (a very crucial support for it). NIFTY should have witnessed a pullback due to short covering, but failing all the expectation it even breached its Crucial Support of 5500 in intraday. Markets ended in deep red as profit booking by foreign institutional investors, inflation worries along with weak European markets spooked sentiments. The worst hit were stocks from interest rate sensitive sectors like realty and auto on concerns that rising interest rates would hit sales adversely. 

Net Selling of Rs. 706.84 Crore in Cash Segment and Net Buying of Rs. 2298.14 Crore in F&O Segment by FIIs was witnessed on Friday’s Trading Session.

In F&O Segment Net Buying of Rs. 3039.64 Crore was witnessed in Index Options, while, Net Selling was of Rs. 320.59 Crore, of Rs. 412.41 Crore and of Rs. 8.50 Crore was witnessed in Index Futures, Stock Futures and Stock Options, respectively.  

NIFTY FEB FUTURE ended with a Premium of 24.40 points to the Spot NIFTY.

Technically, both the Moving Averages tried to give a Positive Crossover, but could not succeed and after converging have again given a Negative Crossover now. The levels of 5400 and 5375 are still acting as Strong Support for NIFTY (on the closing basis). The formation of a Black Opening Marubozu Candlestick Pattern, and closing below the 50% Retracement level (drawn from 4920 to 6388), signals a cautious approach towards the market. Now if NIFTY closes above 5600 for 2-3 sessions consecutively, it may witness a pullback till the levels of 5700 and 5750.  Currently, 20-Days EMA (Exponential Moving Average) of 5762.71 is acting as a good resistance for NIFTY.

On the Economic Front, AUSTRALIA will be coming out with its Private Sector Credit for the month of December. Vehicle Production, Housing Starts and Construction Orders for the month of December will be announced in JAPAN. GERMANY will be coming out with its Retail Sales for the month of December. Consumer Price Index for the month of January will be announced by EUROPEAN MONETARY UNION. Personal Consumption Expenditure and Personal Income for the month of December and Chicago Purchasing Managers Index for the month of January will be announced in US.  

Q3 2011 Results Season has commenced all over the Globe. In INDIA, ANDHRABANK, CANBANK, CENTRALBNK, COLPAL, DABUR, DLF, GVKPIL, IDFC, INDHOTEL, JINDALSAW, LAKSHIMACHINE, KEC, LML, MAHSEAMLESS, MCLEODRUSS, MMTC, NATIONALUM, NOVARTIS, NTPC, ROLTA, SHREECEM, STRANSFIN, SUNPHARMA and TATACOMM will be posting their Quarterly Numbers today. In FRANCE, AREVA S.A. will be posting its Quarterly Numbers today. In US, EXXON MOBIL CORPORATION will be posting its Quarterly Numbers today. Traders are suggested to trade cautiously by following Strict Stop Losses and Booking Fast Profits, whereas, Investors are suggested to avoid making Fresh Investments at this point of time in the Markets.

NIFTY is now trading below its 20-Days EMA (Exponential Moving Average), 50-Days SMA (Simple Moving Average) and 200-Days SMA of 5762.71, 5889.23 and 5621.91, respectively. Both the Moving Averages have again given a Negative Crossover, as Short Term Moving average has crossed the Long Term Moving Average from upside to the southward direction. MACD (Moving Average Convergence Divergence) and RSI (Relative Strength Index) have again turned southbound, signaling a bit of more selling pressure to come in.

For the day, intraday resistance for NIFTY comes at 5530 / 5550 / 5580 levels. At the same time, 5480 / 5450 / 5420 will act as major intraday support levels.

What does Indicators Say?

1. RSI (14 Days & 9 Days): The values are 30.31 and 36.63, respectively, showing a negative crossover.

2.  MACD (26 Days & 12 Days): Their Values are -97.05 and -81.21, respectively. a negative crossover is indicated by both the Moving Averages.

3.  +DI: 13.81, -DI: 35.07, ADX: 29.48: The Negative Directional Index has gained strength over the Positive 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 5889.23          and 5762.71. Both the Moving Averages are showing Negative Crossover.