Technical view for the week ended 25/02/2011:
It was a tough week for traders and analysts both in terms of volatility prior to the budget and because of the settlement.
We had suggested as some strength was developing on daily chart looking at the possibility of the INVERTED HEAD AND SHOULDER structure but luckily we clearly mentioned that any upside possibility for nifty was only on a close above 5527 and for sensex that crucial level was 18457 but both index failed to close above these levels even though bulls tried for two days to cross them.
And finally on Thursday as there was a hint of weakness as we suggested that the 5/8/13 ema band has again given a sell cross and so on the settlement day as sensex started to trade below 18050 and nifty below 5369 it was clear that the bullish pattern was not going to work.
We suggested through last 2/3 weeks technical views that the bse health index bse it index and bse auto index have formed major tops and this analysis worked last week as the banking index bounced back but these other indices let sensex and nifty down and because of weakness in these indices the supposed INVERTED HEAD AND SHOULDER pattern did not work.
Last week we also suggested about extreme overbought condition of dow jones and the us markets fell the most in last 3 months during last week.
We did clearly mentioned a few points in last few days one was that the correction must remain slow second was that if the positive structure has to work sensex must close above 18457 which was Tuesdays high third was protection of 18050 fourth was extreme high overbought position of dow jones and as sensex started to trade below 18050 it was clear that the supposed head and structure is not going to work and as we said in our weekly technical view if such positive structures fails it can have severe downside impact.
Any rise from now on will be short lived and will have to be used to create short positions only.
What can we expect in the budget week ?
First a big caution for traders this week that the sensex and nifty are at supports as they are near their February lows and Monday will be budget day and markets will be very very volatile for two days as on the budget day there will be intraday volatility on finance ministers announcements and on the next day there will be some gap up and gap down moves in different stocks and sectors as the market understands the positives and negatives from budget for them.
Sensex :Sensex made a HAMMER on daily chart on Friday but it need a big bull candle as a follow up to confirm a short term bottom and although there can be a double bottom pattern on daily chart looking at the price structure pn weekly chart there is more possibility of a few days sideways move if 17400 is held..
For today support at 17470 and 17339 and resistance at 17812 and 17940 all bullish possibilities are valid only after sensex closes above 17940.
For the whole week 18086 and 18032 are levels to watch for the upside and to be considered as strong resistance levels for the week.
On the downside 17400 is the level to watch for this week.we are presenting sensex charts of different time frames with comments for medium term.