Nifty Outlook for 27th July 2011

Yesterday, NIFTY made a Bearish Engulfing Candlestick Pattern, which engulfed last two day’s candles in it completely and more selling pressure to creep in. After crossing an important resistance of 5700 continuously for last two trading sessions in intraday trading, NIFTY again reverted from there. NIFTY witnessed a flat opening in the positive terrain of almost 8-10 points, and immediately registered an intraday high of 5702.25. But immediately after touching the level of 5700, NIFTY dipped almost 20-25 points from the day’s high and traded very flat till the announcement of RBI’s (Reserve Bank of India’s) Credit Policy. And, as soon as news broke out of a 50 basis point hike in key interest rates, the markets tank completely in the red. Markets kept hitting ground and registered intraday lows about 30 minutes before the closing bell. NIFTY marked a low of 5560.15 for the day, almost 140 points down from the day’s high. The Reserve Bank of India (RBI) hiked the repurchase rate, commonly known as repo rate, by 50 basis points to 8%. Thus, the reverse repurchase rate or reverse repo rate stands at 7%, 100 bps lower than the repo rate, while the cash reserve ratio or CRR stands at 6%. This move of RBI gave a hard stroke to the market as the expectation of was only 25 Basis Points hike. Interest Rate Sensitive Sectors like, REALTY & INFRA, CAPITAL GOODS, BANKING & FINANCE and AUTO were the major stocks which dipped Markets into red. RBI’s move was a real shocker for the Dalal Street yesterday. For the day, NIFTY registered a much weak closing at 5574.85.

Technically, NIFTY has completed the southward movement of Fibonnaci Retracement drawn from the High of 6338.50 (08^th November, 2010) to the Low of 5177.70 (11^th February, 2011). NIFTY has also completed another longer Extension Level drawn from the Low of 4786.45 (25^th May, 2010) to the High of 6335.90 (08^th November, 2010). After making a low of 5195.90 on 20^th June, 2011, NIFTY again reverted and entered the Extension marked on the chart. Yesterday, NIFTY opened above the level of 50.00% (5620.13) of the Extension drawn at 5554.60 at 5688.45 and also made a high of 5702.25, but could not sustain any more and slipped to the 38.20% Level (5561.17) of the Retracement drawn from the high of 6335.90 by making a low of 5560.15, but at the same time it maintained to close above this level at 5574.85. NIFTY also breached its 20-Days EMA of 5583.98 on closing basis. Currently, the 50-Days SMA of 5513.22 is acting as a Short Term Support for NIFTY on the closing Basis, as if it breaches NIFTY may again take a dip to the levels of 5480. A Negative Crossover between 200-Days SMA (Simple Moving Average) and 50-Days SMA is still intact, but at the same time both the 20-Days EMA (Exponential Moving Average) and 20-Days have given a positive crossover, which signals a positive move for some of the trading sessions ahead. Now, the 200-Days SMA of 5720 is playing a role of a stiff resistance level for NIFTY on the closing basis, whereas the level of 5170 proved to be a Good Support for the long term.

On the Economic Front, JAPAN will be coming out with its Retail Trade and Large Retailer’s Sales for the month of June. Consumer Price Index for the month of July will be announced in GERMANY. EUROPEAN MONETARY UNION will be coming out with M3 Money Supply for the month of June. CBI Industrial Trends Survey – Orders for the month of July will be announced in UK. US will be coming out with its MBA Mortgage Applications and Durable Goods Order for the month of June.

Traders are suggested to trade cautiously by following Strict Stop Losses and Booking Fast Profits, whereas, Investors are suggested to focus on Bottom Fishing and invest in the markets for short term only, as markets are still prone to Uncertain Scenario both at the International and National Levels.

Q1 FY11 Results Season is running all over the Financial World. Hence, here is a quick look at some important results to be announced domestically and internationally. ALFALAVAL, ASAHIINDIA, BIRLACORP, BANKBARODA, CANBK, CHENNPETRO, DABUR, EIDPARRY, ENGINERSIN, GAIL, HCLTECH, HEXAWARE, IDFC, LUPIN, MARICO, NAGARFERT, OILINDIA, PANACEABIO, STAR, TRENT, TTKHEALTH, UCOBANK and ULTRATECH will be announcing their Q1 FY11 Results tomorrow in INDIA. Peugeot SA and Air France KLM SA will be announcing its results tomorrow in FRANCE. Merck FGaA, Puma AG Rudolf Dassier Sport Daimler AG will be announcing their results tomorrow in GERMANY. Virgin Media Inc, Boeing Co, Tupperware Brands Corp, Delta Airlines Inc and Visa Inc will be announcing their results tomorrow in US.

NIFTY is again trading above its 50-Days SMA of 5515.94, but at the same time is below its 20-Days EMA and 200-Days SMA of 5583.98 and 5712.75, respectively.

What does Indicators Say?

1. RSI (14 Days & 9 Days): The values are 50.10 and 53.47, respectively, showing a short term negative crossover.

2. MACD (26 Days & 12 Days): Their Values are 26.09 and 61.10, respectively. A short term negative crossover is indicated by both the Moving Averages.

3. +DI: 28.46, -DI: 19.57, ADX: 18.13: The Positive Directional Index has gained strength over the Negative Directional Index and also the Average Directional Index is below 20, indicating that the market is in the trading range right now.

4. SMA (200 Days), SMA (50 Days) & EMA (20 Days): The values of these indicators are 5712.75, 5515.94 and 5583.98.

Some Trading Stats of the Tuesday’s (26^th July, 2011) Trading Session:

Net Selling of Rs. 177.75 Crore in Cash while Net Buying of Rs. 687.34 Crore in F&O Segment by FIIs was witnessed on Tuesday’s Trading Session.

Net Buying of Rs. 98.98 Crore and of Rs. 148.63 Crore was witnessed in Mutual Funds and Others Segment, respectively, whereas, Net Selling of Rs. 593.44 Crore was witnessed in Proprietory Trades.

In F&O Segment Net Selling of Rs. 311.63 Crore, of Rs. 896.59 Crore and of Rs. 14.29 Crore was witnessed in Index Futures, Stock Futures and Stock Options, respectively, whereas, Net Buying of Rs. 1909.85 Crore was witnessed in Index Options.

NIFTY JULY FUTURE ended at the same level that of the Spot NIFTY.

A view on some of the NIFTY 50 Stocks for TOMORROW:

BHEL:               Can dip to the levels of 1870/1860, if breaches the level of 1890.

CIPLA:              Can dip to the levels of 306/305, if breaches the level of 311.

DLF:                Can dip to the levels of 228/226, if breaches the level of 234.

ICICIBANK:        Can dip to the levels of 1020/1010, if breaches the level of 1040.

IDFC:               Can dip to the levels of 131/130, if breaches the level of 134.

ITC:                 Can dip to the levels of 196/195.

KOTAKBANK:    Can dip to the levels of 455/450, if breaches the level of 465.

For the day, intraday resistance for NIFTY comes at 5590 / 5620 / 5650 levels. At the same time, 5550 / 5520 / 5480 will act as major intraday support levels.