The Hindu Business Line : Nifty poised at a critical level

Preferred view: The market action last week was in line with expectations. The Nifty ruled weak on Monday and also dropped to the target zone of 2740-2750.

It is positive to note that the index managed to hold above the crucial bearish trigger level of 2730. Though this level was breached during the intra-day trading on Tuesday, the index recovered smartly and closed on a strong note at the end the day.

On the flip side, the inability of the index to close above the trend barrier at 2830-2840 is a cause of concern. Even on Friday, the index edged past this range only to recede and close below 2840. Though there is a case for a rally towards 2975-3000, the confirmation of the resumption of uptrend would arise on a close above 2875.

The index faces resistance at the upward sloping channel line at that connects the tops at 2183.45 and 2669.2. This line is moving up at the rate of 3.5 points per day.

A convincing close above this level would be the minimum requirement for the resumption of the uptrend. A close above 2840 would be an early sign of strength while a close above 2875 would confirm the possibility of a rally to 2975-3000.

On the other hand, a close below 2720 would be an early sign of the onset of a prolonged corrective phase. This could pave way for a test of the 2630-2640. The price action over the next few weeks would be critical in influencing the future course of market movement.

Comments: The strong uptrend witnessed in 2005 pushed the index ruling within the striking distance of the 3000-point mark.

The record FII inflows played a crucial role in bolstering market sentiment. The sharp rise in price of gold and oil and the spate of interest rate hikes effected by the US Federal Reserve failed to check the flow of FII money into the country. The outlook for the year 2006 is featured on Page 6.

SENSEX (9397)

The index managed to hold above the crucial support level at 9080. Though the index dropped below this level on a couple of occasions during the week, the close was convincingly above it.

This effectively negated the possibility of a further drop, as the index managed to hold above the first support level.

The near-term trend appears positive and a move to 9950-10000 appears likely. This view would gain currency only on a close above 9500.

A close below 9080 would have negative implications and would push the index to 8650-8700. We would continue to favour a short-term bullish view for the Sensex and Nifty until such time the market action dictates otherwise.

More Stories on : Technical Analysis | Stock Markets

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