WEEKLY TECHNI VIEW

General technical view for the week ended 28/01/2011:

“A very poor start for 2011” these are the only words by which we can describe the first month of the new year 2011.

5^th November 2010 highs in both sensex and nifty  will be considered as a major top where the big bull run started from oct 2008 seems to have ended.

In our weekly report dated 24^th jan 2011 we said this,

“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.”

On 24^th jan the markets closed with some strength but the resistance area of 5/8/13 d ema on daily chart of both sensex and nifty proved a major hurdle and for sensex a close above 19167 and for nifty a close above 5747 were our suggested levels if the upside correction was to have any momentum and on 25^th jan both indices crossed these levels for few hours but closed significantly down below these levels which ended the six days volatile correction near 200 day ema and in our daily technical view on Wednesday we suggested a threat to 200 day ema for sensex and nifty and finally both indices closed the week way below their major supportive 200 day ema thus theoretically putting an end to the big rally.

We would like to take a note of what we had said about the behavior of sensex/nifty and their respective 200 day ema in last few months while we used a typical observation as one of the innovative technical tool to predict a major top in our markets way before others would have even realized that such a huge approx. 3000 points crash in sensex is coming in near term future.

SENSEX / NIFTY 200 DAY EMA AND MY OBSERVATION

ON 11th oct 2010 and then in dec 2010 i presented nifty and sensex charts with their respective 200 day ema at that time.

i suggested while writing about a probale MAJOR TOP that this time around the 200 day ema may get broken.

 it happened on 27^th jan 2011.

This is what I wrote on 11^th October 2010.

“ 200 day ema

As shown in the sensex chart, the sensex has shown tendency to test  the all important 200 day ema, TWICE  and after taking support for two times in a row (resistance in down trend),it is seen to break the 200 dema.

In our case, sensex recently tasted the 200 dema in early feb-2010 and than in late may-2010,may be the time is due for the history to repeat itself.

And here were my charts of nifty and sensex  which I presented here in oct-2010 and dec -2010.

One must remember that the 200 day exponential ma (some analysts give weightage to simple ma)is considered as major technical tool used worldwide as an important trend decider level where institutional players take entry and exit as for any markets analysts consider that the specified market has entered long term bear phase if it consistently trades below the 200 day ema.

Erosion of value since our annual meet early this month:

In our annual meet early this month we predicted a 12-18 month bear market with a tentative sensex target of 14000-15000 for the year 2011.

Here is the value erosion since then in various index /stocks were we made some negative coments and clearly advised to exit longs.

Sensex : 9%

Nifty: 9%

Bank nifty : 10%

Adag group :14-16%

Reality index: 15%

Mid cap index: 7%

Small cap index: 9%

Larsen: 13%

Jsw steel: 13%

INDEX STUDY:

Bse health index:

One of the strongest index was bse health index up to 2010 but now even this sector seems to have a major top in place.

Bse auto index :

Another index completes triple top on weekly charts.

Bse auto index is at 38.2% retracement so there can be a corrective upside but downside targets for medium term can be 8301 and 7785.

Sensex :

Sensex has clearly broken its 200 day ema on daily charts and one more confirmation of the strong bearishness came as the year long channel as shown on sensex weekly chart failed to give enough support and sensex has entered back in to the channel.

We firmly believe now that the two year long bull market has ended and thus as we have to calculate retracement for the entire rally to find out meaningful supports/targets 16021 is 38.2% of the entire rally in the medium term sensex has this target for the downside.

There can be some upside corrections which we will be tracking on day to day basis but 16021 is the major level that we will have to watch.

for coming days lows around 18800 and highs around 19500 will be stiff resistance for sensex considering these levels as wetry and find out a short term bottom if this severe selling spree continues sensex should made a panic bottom around 17767 as there can be a hope based pre budget rally .

Nifty :

Nifty has closed for two days in a row below its 200 day simple ma at 5612 and below its 200 day exponential ma at 5656 around so these levels are important levels to watch for the upside resistance.

But the real stiff zone of resistance for nifty will be 5689-5738-5801 for coming days and on the downside 5414-5337 is the zone where nifty can make a panic low.