The Hindu Business Line : Corrective phase is not complete

Though the index managed to move past the crucial positive trigger level of 2650, the failure to hold above this level had effectively negated the earlier break.

The recent downtrend does not appear complete. After a brief rally to the immediate resistance zone at 2610-2620 range, the index is likely to drop to the crucial support at 2535-2545 range. A close below 2530 would be a negative trigger and may lead to a drop to the 2450-mark.

The outlook would turn positive only a close above 2650. Though there is a possibility of a test of the 2730-2750 range in the near term, it hinges on the price movement in the next few days. A close below 2530 would indicate that the market is headed towards a correction.

The occurrence of the bearish "key reversal bar" pattern in the weekly chart is an indication that the Nifty may continue the recent downward correction. Holders of long position may tighten stop-loss levels. As the 2530-mark is a crucial level, investors may move the stop-loss to this level.

Comments: Except for oil sector stocks, most frontline stocks took a knock during the sell-off that started on Thursday. With the corporate earnings season kicking off, the market could get into a more volatile phase. Infosys is scheduled to report its second quarter earnings on Monday.

As Infosys is already in an overbought zone, the stock could ease off to lower levels. This supports the short-term bearish outlook for the market.

SENSEX (8491)

Preferred view: The index ruled weak as anticipated last week. The Sensex appears well on course to drop to the target zone of 8350-8400. The near-term outlook appears weak. A close below 8400 would indicate the continuation of the bearish trend. The index could subsequently slide to 8150-8200 range. Investors may reduce exposures on rally. Fresh exposures in fundamentally sound companies may be contemplated at lower levels.

CNX IT (3345)

The index turned bearish on Thursday, after having recorded a sharp upward move in the early part of the week. As observed last week, a move past 3350 imparted strength and pushed the index to a high of 3450 on Wednesday. The near-term trend is bearish and a drop to the 3220-3230 range appears likely.

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