Nifty Outlook for 26th August 2011

Yesterday, NIFTY made a Black Opening Marubozu Candlestick Pattern, which indicates that it was a day for bears and such a bearish rally should cause concern among the bulls. It is a strongly bearish candlestick pattern. Markets kick-started trade on a strong note tracking strong Asian markets. An improvement in durables orders, coupled with rise in home prices for the month of July in US further boosted the sentiment in the domestic market. Consequently, NIFTY made a high of 4915.85 within moments of opening. However, the bears overpowered the bulls soon, as market fell into the negative terrain and remained there throughout the morning session. Sentiment deteriorated further with the announcement of weekly inflation numbers. For the week ended August 13, the primary articles inflation came in at 12.4% versus 11.64% (WoW), while the food articles inflation rose to 9.8% versus 9.03% (WoW). Fuel group inflation remained unchanged at 13.13%. However, the afternoon session saw the market change gears as bottom fishing, coupled with strong opening of the European markets helped improve sentiment. NIFTY re-entered the positive terrain soon. The reign in the green, however, was short-lived, as market slipped back into the negative terrain and remained there for the rest of the session. At the wee hours of trading, NIFTY fell to its intraday low of 4825.05. IT, METAL and BANKING & FINANCE were the major laggards. As expected, extreme volatility was witnessed in the markets which also kept the traders away for the day. For the day, NIFTY closed near to its day’s low at 4839.60.

Technically, NIFTY finally touched the most awaited level of 4800, awaited since the next week of Diwali 2010. Yesterday, it was witnessed that the level of 4880 was acting as a Good Trading Support Level for NIFTY, but in the last half an hour of trade NIFTY breached it and made a low of 4825.05 for the day. The 20-Days EMA and 50-Days SMA have again made a Negative Crossover, hence, indicating more selling pressure to creep in. A Negative Crossover between 200-Days SMA (Simple Moving Average) and 50-Days SMA is still intact. Right now, the level of 5200 is playing a role of a stiff resistance level for NIFTY on the closing basis, whereas the level of 4750 will be acting as a Good Support Level in the coming sessions. The so-called level of 4800 got achieved by NIFTY; still it is in the down trend, as there is more Bad News in the offing in terms of International Economic Uncertainties. A Fibonnaci Retracement Level is being drawn from the High of 6338.50 (08^th November, 2010) to the recent 21-Months Low marked 4796.10 by NIFTY (19^th August, 2011), which represents the level of 5160 (Level of 61.80%) as the first important resistance level to be crossed on the Closing Basis for the NIFTY to enter in a Comfortable Zone for traders. A pull back till the levels of 5150 or 5200 can be witnessed in the coming trading sessions.  

On the Economic Front, EUROPEAN MONETARY UNION will be coming out with its M3 Money Supply for the month of July. Q2 Total Business Investment, Q2 Gross Domestic Product and Index of Services for the month of June will be announced in UK. US will be coming out with Q2 Real Personal Consumption Expenditures, Q2 Gross Domestic Product and Reuters/Michigan Consumer Sentiment Index for the month of August.

Traders are suggested to trade cautiously by following Strict Stop Losses and Booking Fast Profits, whereas, Investors are suggested to stay from the markets right now, as market will give better chances ahead for Bottom Fishing and earning handsome returns thereafter.

NIFTY is trading below all its Moving Averages like 200-Days SMA, 50-Days SMA and 20-Days EMA of 5612.93, 5383.15 and 5107.95, respectively. 14-Days RSI (Relative Strength Index) and 26-Days MACD (Moving Average Convergence and Divergence) are moving towards their oversold zone with every sell off in the markets.

What does Indicators Say?

1. RSI (14 Days & 9 Days): The values are 27.65 and 28.80, respectively, showing a short term positive crossover.

2. MACD (26 Days & 12 Days): Their Values are -256.40 and -220.88, respectively. A short term positive crossover is indicated by both the Moving Averages.

3. +DI: 10.26, -DI: 36.68, ADX: 41.88: The Negative Directional Index has gained strength over the Positive Directional Index and also the Average Directional Index is above 40, indicates that the market is in the trading range right now.

4. SMA (200 Days), SMA (50 Days) & EMA (20 Days): NIFTY is trading below the levels of of these indicators are 5612.93, 5383.15 and 5107.95.

Some Trading Stats of the Thursday’s (25^th August, 2011) Trading Session:

Net Selling of Rs. 1440.55 Crore in Cash while Net Buying of Rs. 1296.65 Crore in F&O Segment by FIIs was witnessed on Thursday’s Trading Session.

Net Selling of Rs. 1692.10 Crore and of Rs. 534.14 Crore was witnessed in Proprietory Trades and Others Trades, whereas, Net Buying of Rs. 287.30 Crore was witnessed in Mutual Funds Segment.

In F&O Segment Net Buying of Rs. 1109.99 Crore and of Rs. 381.77 Crore was witnessed in Index Options and Stock Futures, whereas, Net Selling of Rs. 179.66 Crore and of Rs. 15.45 Crore was witnessed in Index Futures and Stock Options.  

NIFTY AUG FUTURE ended at a Premium of 2.15 Points to the Spot NIFTY.

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

GRASIM:            Can touch the levels of 2195/2205, if crosses the level of 2165.

AXISBANK:        Can dip to the levels of 990/985, if breaches the level of 1015.

BHEL:              Can dip to the levels of 1720/1710, if breaches the level of 1740.

For the day, intraday resistance for NIFTY comes at 4860 / 4890 / 4920 levels. At the same time, 4800 / 4780 / 4750 will act as major intraday support levels.