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B. Krishnakumar

NIFTY (1645.8)

Preferred view: The market movement was in line with last week's expectations. The index ruled firm and managed to move to the earlier mentioned target zone of 1675-1700. After touching a high of 1688, a bearish trend prevailed on Friday.

Though the index could rule weak in the near term, there is a possibility of a rally to higher levels after the completion of a short-term correction. This view would remain valid as long as the index does not drop below 1610. A close below this level could pave the way for a drop to the 1500-1510 level.

Comment: As mentioned last week, the move past the 1635 level imparted bullishness and helped the index move to the projected target zone. However, the formation of a series of "Doji" patterns, followed by the completion of the "Bearish Engulfing" pattern in the Japanese Candlestick charts is a bearish development.

Trading action over the next few days will indicate if the decline on Friday marks the beginning of the much-awaited, longer-term correction. The momentum behind the fall on Friday, along with negative divergence between price charts and indicators, may be considered as a forewarning of an impending long-term correction.

Alternative view: Though a short-term weakness remains the preferred view, a close above 1690 would pave the way for a rally to higher levels. A close above this level could help the index move to the 1725-1730 range.

SENSEX (5131.7)

Preferred view: The index ruled firm in line with the outlook indicated last week. It also managed to move to the earlier projected target zone of 5250-5300. After scaling a peak of 5263.1, it turned extremely bearish on Friday. The index is likely to resume the downtrend that started on Friday. A drop below 5040 would have negative implications and could push the index to 4840-4850.

Comments: Despite the positive momentum on previous days, the index ruled weak on Friday when the magnitude and pace of decline was quite significant. The price action in the next few days would provide critical insights about the medium term trend.

Alternative view: At the moment, only a close above 5300 would reinstate the bullish trend. This could push the index to the next target zone at 5400-5450.

S&P CNX 500 (1318.8)

Preferred view: As in earlier weeks, the index moved in tandem with other major market indices. Similar to other indices, the CNX 500 index too touched the earlier mentioned price target range of 1350-1400. The near-term trend appears weak and a drop to the range of 1270-1280 appears likely. A breach of 1270 could lead to a drop to the next support level of 1210-1220.

Comments: After a sharp uptrend, the mid-cap stocks such as India Cement, Sundaram Clayton, Bata India, MRPL and Polaris Software turned weak in the last couple of trading days. The price pattern in quite a few stocks, including Tata Power, Aban Loyd, Balaji Telefilms and Tata Engineering, indicate short-term weakness. This lends credence to the near-term bearish outlook for the index.

CNX IT (20708.6)

Preferred view: The index was unable to move past the crucial resistance level of 21300 that was mentioned last week. Though it broke above this level on Tuesday, it failed to hold on. The recent weakness and the emergence of bearish price patterns in technology stocks indicates that the index could seek lower levels. A drop below 19850 could lead to a drop to the levels of 18500-18600.

NASDAQ COMPOSITE (1937.8)

The index ruled weak in line with last week's expectations. The near-term outlook remains weak and the index could drop below the negative trigger level of 1870. A breach of this level could pave the way for a test of 1780-1800. Only a move past 2000 would negate the bearish outlook.

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