Nifty Weekly Outlook (21st to 25th February 2011)

From 5310 to 5458.95, NIFTY gained almost 148.95 points and ended in Green last week on Friday (18^th February 2011) at 5458.95 gaining around 2.81% as compared to the last week’s closing of 5310. Last week, markets were buoyed with the cooling off of the Geopolitical Tensions in Egypt, which was welcomed by all the markets around the globe. Last week NIFTY witnessed a good pullback along with a range bound and low volume participation. On Monday, markets celebrated the cooling off of Geopolitical tensions in Eqypt with a Gap Up opening of almost 30 points. For the next two days, NIFTY traded very range bound with almost no volume. On Thursday, after facing a bit of panic in the market, NIFTY witness again witnessed a bounce back after crossing the important resistances of 5500 and 5530 and touched the high of 5553, hence posting a robust closing of 5546.45. Again on Friday, NIFTY witnessed a robust opening and tried to touch it’s another important resistance of 5600, hence marked a high of 5599.25 for the week. A bit of bounce was witnessed in the REALTY & INFRA, CAPITAL GOODS, TEXTILES, CONSUMER DURABLES, SHIPPING, AVIATION, BANKING & FINANCE and AUTO Stocks. A lack of interest in the markets was witnessed from FIIs (Foreign Institutional Investors). On the last trading session, a sell off was witnessed, driven by some market rumors. Last week, NIFTY closed above 50.00% Retracement Level (marked from 4538.50 to 6388 on the Daily Chart), which raises the chances of a pullback in the markets, as UNION BUDGET SESSION is in the offing, NIFTY may move to the levels of 5550 and 5600 (on the closing basis).  NIFTY for the week made a low of 5340.25 and finally closed at 5458.95.

Last Week, Net Buying of Rs. 396.29 Crore by FIIs, while, Net Selling of Rs. 72.06 Crore by DIIs was witnessed in the Cash Segment.

 

Technically, NIFTY has made a sort of Bullish Inverted Hammer Candlestick Pattern, after making a Bullish Hammer Candlestick Pattern. If the hammer would have characterized by a close above the open thus causing a white body, the situation would have been even better for the bulls. The Bullish Inverted Hammer Candlestick Pattern, proves its formation if the next week opens above the real body of the inverted hammer, it means that those who shorted at the opening or closing of the inverted hammer day are losing money. The longer the market holds above the inverted hammer’s real body, the more likely these shorts will attempt to cover their positions. This may ignite a rally as a result of covered short positions, which may then inspire the bottom pickers to take long positions. However, the last week’s Candle’s formation got a confirmation as the last week has closed above the earlier week’s closing. Even in the last week a rally ignited as a result of covered short positions, inspired by the bottom pickers to take long positions. NIFTY has closed above the last week’s closing, signaling a pullback still left to come. NIFTY tried to cross its 40-Days EMA (Exponential Moving Average) of 5608.91, but could only touch it by making a high of 5599.25 and closed below its 20-Days EMA of 5497.32.

A gloomy picture of the economy is weighing on the markets with Q3 FY11 Numbers also disappointing the Dalal Street, except the Banking Numbers. As the results season has ended now, the markets are now eagerly waiting for the RAIL BUDGET and the UNION BUDGET, even though the Government is blotted by many Corruption Cases. Hence, Investors are suggested to avoid making investment in the Markets right now and wait for the right direction for the market to be decided after the announcement of Budgets. Traders are suggested to trade with the market trend in the markets by following Strict Stop Losses, as markets will be very volatile till the announcement of the Budgets.

On the Global front, in ASIA, Thailand will release its fourth-quarter gross domestic product data, Hong Kong is set to report a budget surplus for the current fiscal year, and we'll see the latest report on Japan's core consumer prices. INDIAN GOVERNMENT WILL BE ANNOUNCING ITS RAIL BUDGET AND UNION BUDGET. In EUROPE, Commerzbank, Royal Bank of Scotland Group and Lloyds Banking Group will all report earnings next week. In US, Protests across the troubled region will continue to affect U.S. markets and could push oil and gold prices higher during a holiday-shortened week. Housing and GDP reports also are due.

For the next week, the levels of 5640 & 5750 will act as an important resistance, whereas the levels of 5400 & 5300 will act as an important support for NIFTY.