Friday turned out to be the day with huge volatility perhaps the most volatile day in a few months.
Sensex first made a low below 19000 and then rose smartly up and at a point it was even up by 170 points but once again the selling pressure resumed and the selling was so relentless that in no time sensex breached the major support zone of 19000-18954 and closed very much near the 200 day ema.
For today and for a few days the zone between 19000 and 19250 will be a strong resistance zone and if sensex breaches its 200 day ema which is at 18827 the first support from where we expect a very strong counter attack from bulls is 18501.
Nifty:
Nifty also witnessed huge volatility and this is a normal observation that such volatility occurs at some very important support as in our case 5700 was such a support that both bears and bulls put their best effort to protect / break such an important level in a hurry and we predicted the target of 5646 at the beginning of last week as it is 200 day ema and as expected after taking a formality halt nifty arrived at 5646 with a bang.
We expect more volatility at around 200 day ema at 5646 and 200 day sma which is at 5606 and nifty may take some convincing support at 5556 which is 38.2% retracement level of the last big bullish leg.
weekly view:
Weekly technical analysis review:
On Monday at around 5830 we said on a chart of nifty that there will be a formality halt to the downside move for a few days before another leg of crash coming and our first target was 5646 which was the value of 200 day ema and after four days sideways and rangebound move between 5700 and 5865 nifty or sensex were not able to reach even 38.2% retracement levels and on Friday nifty closed exactly at 5645.
Stocks like Larsen ,jsw steel ,icici ,idfc and iob which were presented as short sell candidates since last week were bitten down heavily and bank nifty has been our focused index with strong bearish view from above 12000 when we gave first down side target of 11300 and our next target was 10648 and on Friday bank nifty closed at 10432 and lost 5.6% during the last week.
Another big sector index which we covered with a strong bearish view was bse cgs and especially when it formed a triangle pattern we clearly said that a break of this triangle will have significant impact of future of our markets as a whole.
Here is the chart of bse-cgs index with earlier comment and the result.
This index lost hefty 10.1% after it broke the triangle.
This is a glimpse of past now let us focus on the week ahead.
Sensex :
In our annual meet we presented our strongly bearish view for the year 2011 but such bigger targets never come in a straight fall corrections are bound to be part and parcel of any big move.
Where do we expect a corrective up move in sensex ?
Here is the chart of sensex with a support line drawn from which a corrective bounce is possible.
18090 so watch these two levels to buy some strong stocks for a good pull back rally may be on a budgetary hope.
We presented our observation of Fibonacci retracement levels matching at a certain level when in early October 2010 at high around 21000 for sensex and around 6300 for nifty we arrived at a conclusion that sensex and nifty will have downside target of 19000 and 5700 respectively.
Now there is another Fibonacci level which is matched when we have compared two different legs of sensex, so for medium term we will have these levels as a good target zones.
On the chart presented below we have tried to show you the strength of bears on weekly chart as now we have lower top –lower bottom confirmed
We strongly believe that technicals are always ahead of fundamentals and when we talked about a major top on the cards three months back everyone was talking only and only about greater bull run and infact there was no sign of weakening fundamentals and now when there is a severe fall coming in a span of just two weeks after a hope based rally in December every news paper/tv channel is flooded with news that how Indian economy has fundamental issues lurking on the horizon at macro level for 2011.
The last leg of rally in the later half of 2010 was momentum based rally and huge fii money chased momentum stocks and such funds simply gets out when it finds any sign of loss of momentum.
We clearly said in our articles rearding major top in October and November 2010 that topping is a process and that it takes some time for any market to top out and we watched sector to sector and we clearly guided every one how different sectors are being topped our one by one.
From the first week of January three major sectors started to loose momentum which were it /auto and pharma and that was the major confirmation to our belief that we will now have a lower top-lower bottom in place on weekly charts.
Nifty:
For nifty this week will have support at 5606 and 5556.
On the upside the zone between 5700-5875 will be a strong hurdle for nifty for the month.
Here is another important observation regarding 200 day ema and nifty.
We beliwe that in coming days after some more volatility near 200 day ema nifty will decisively break its 200 day ema.
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