WEEKLY TECHNI VIEW

General technical view for the week ended 21/01/2011. :

Markets did  virtually nothing last week.

The range for sensex for the whole week was between 18779 and 19167 which is less than 400 points  and for nifty the range was between 5624 and 5747 for the whole week such a small range for both index clearly suggests indecisiveness for the markets .

Sensex and nifty view for the week of 24-29^th January -2011:

In our opinion if sensex and nifty can not create a strong bullish candle next week to handle the bear force that we have seen then the month end will finish with strong bearish note.

First it was the month of November and now the first two weeks of January 2011 when bears were in full control of the proceedings.

 this week which will be almost the last week of the month of January barring just last day which is Monday on 31^st January and if sensex and nifty can not give a strong pull back rally and goes down further or remains sideways then many major stocks and indices will complete the month with very strong downside reversal patterns on monthly charts and we believe that if this happens then there will be significant selling pressure in coming weeks/months.

Generally, the bullish candle real body of Day 1 is contained within the real body of the bearish candle of Day 2.

The market gaps up (bullish sign) on Day 2; but, the bulls do not push very far higher before bears take over and push prices further down, not only filling in the gap down from the morning's open but also pushing prices below the previous day's open.

With the Bullish Engulfing Pattern, there is an incredible change of sentiment from the bullish gap up at the open, to the large bearish real body candle that closed at the lows of the day. Bears have successfully overtaken bulls for the day and possibly for the next few periods.

The above explanation regarding bearish engulfing pattern is taken for daily chart but it is valid for any periodicity of charts as we are talking here about monthly chart.

nifty monthly chart:

The following chart of sbi was presented in the month of November 2010 just to illustrate our observation about markets which nowadays completes two candlestick reversal patterns before reversing the trend like as shown on this quarterly chart of sbi  in 2009 when it completed two candle reversal patterns before reversing the strong bearish trend of 2008.

And as shown on bse national index till 21^st jan 2011 it is also now on the verge of completing two candle reversal patterns before the actual trend reversal takes place.

Quarterly picture of sector indices:

Since January 2011 is the first month of current quarter and our observation regarding development of candlestick pattern suggests that for any periodicity of chart if markets  initiates a development process for an important candle reversal pattern at very early stage of that period generally it completes such reversal patterns at the end of the period.

We mean to say that suppose we are going to see a strong reversal pattern at the end of a quarter we might see its warning signals very early at the beginning of the quarter itself.

This observations helps us in having a vision of markets at the end of the quarter.

Here are few quarterly charts which shows strong bearish candle reversal pattern in the first month of the current quarter itself.

IF COMPLETED these patterns may have strong medium term impact.

Bse auto quarterly chart:

We have been talking about bearish possibilities about our markets.

But we had initiated warning bells in October 2010 since then there has been very heavy erosion of values if someone studies prices of some very active midcap and small cap stocks and some major psu and banking stocks too.

And we do not foresee a crash like what we had seen in 2008 but it will be a gradual down move which may last for 12-18 months and 3 months have been already gone also there is always a bull market even in strong bear market so as once nifty reaches our targets around 5500 (if 5748 not crossed soon) we will try and find out stocks to trade for short term bullishness as there may be a good upward correction from supports.

Levels to watch for the coming week:

Sensex:

Sensex need to close a day above 19167 to have any chance of some corrective rise on the upside and the most important levels where it can find resistance if the upside correction picks up momentum are 19496 and 19720.

Where as on the downside if closes below 18872 then sensex will find supports at 18533 and 18257

Nifty :

Nifty need to close above 5747 to have any upside correction but it will have strong resistance around 5833 and 5879 and on the downside as we are witnessing high volatility near 200 day ema so now if nifty closes below 5634 it will have faster crash up to 5556-5513 as the 200 day simple ma at 5610 may not work as support.

If in any case there is no halt around 5610 and 5556 then nifty will find strong support at 5416 in coming weeks.