The Hindu Business Line : Near-term outlook turns bullish

Preferred view: The movement in the index was in alignment with last week's expectations. The Nifty ruled weak and also dropped below the target level of 2110. After a five-day bearish trend, the sentiment turned bullish on Friday. The price action on Friday resulted in the completion of a bullish "key reversal bar".

To personify a bullish "key reversal bar", the price should open on a weak note and must drop a lower low in relation to the previous day and close on a firmer note.

The close should be in the upper quartile of the day's range. This is a typical bullish reversal and the Friday's price movement is a classic depiction of a "key reversal bar".

The near-term outlook is bullish and a move to the 2150-2160 range appears likely.

A close past 2127 would be an early indicator of the continuation of the upward move. The Nifty enjoys support at the 2070-2075 range.

A drop below 2070 would negate the positive outlook and a decline to the 2025-2035 range may be expected subsequently.

Comments: The market sentiment remained bearish during the week. The index breached quite a few support levels during the week. The rise in the price of crude oil in the international market affected market sentiment.

The lack of buying support from the FIIs did not help the cause either. The stocks from the automobile and banking sectors turned weak.

As a result, the index recorded a five-day losing streak, which was snapped on Friday. Aided by the recovery in Reliance Industries and steel sector stocks, the Nifty managed to close on a firm note on Friday.

After a strong rally in the early part of the week, the steel sector stocks took a knock on Thursday. These stocks, however, gained a part of lost ground on Friday.

Holders of short positions may consider partial profit booking and have a stop-loss at the 2127 level for the rest. Fresh short positions may be avoided for the moment.

Alternative view: Though the earlier articulated view of a rally to the 2250-2300 range remains the preferred one, the index could see a deeper correction if it declines below 2070. A breach of this level could push the index to lower levels of 2035-2050. The movement in the next few days would be critical in deciding the near-term trend in the Nifty.

Sensex (6700.3)

Similar to the Nifty, the Sensex, too, ruled weak and moved to the target zone of 6640-6650.

After hitting a low of 6595, the index staged a sharp recovery to close at 6700 on Friday. The near-term outlook is bullish and the index could retest the recent high of 6955. The positive view would be negated if the index closes below 6430.

CNX IT Index (2946.8)

The index managed to hold above the support level of 2900-2910 that was mentioned last week. The near-term outlook appears positive. A move to the 2975-2990 range appears likely.

A failure to close above 2965 would, however, be a bearish signal and a drop below 2890 would have negative implications.

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Come, let's shop for a mobile

Heady equity prices — Reality check to avoid distress

Why we expect more from Fidelity

Have mutual funds got it right, finally?

HDFC Multiple Yield Fund: Hold

Birla Midcap Fund: Hold

Maiden offer from Fidelity MF

Sell UTV, Buy NDTV & Balaji Telefilms

Apollo Tyres: Buy

IDBI: Buy