The bulls have staged a smart comeback but the volumes during this rise have been poor, raising a question mark as to its sustainability. The battle is not over yet as the bears will try to re-assert themselves in the week ahead
S&P Nifty close: 5050.15
Market Trend
Short Term: Down Medium Term: Down Long Term: Down
The Nifty opened smartly higher for the week and held on to the gains, which made the bears sit up and take notice. Subsequently the bulls succeeded in holding the Nifty above the 4,800 points level (double bottom target) which sent the bears scurrying for cover. This saw the Nifty post a phenomenal recovery of 340 points (+7.22%). The sectoral indices which outperformed the market were BSE Metal (+10.52%) and BSE Bankex (+8%) while the ones which underperformed were BSE Consumer Durables (+1.82%), BSE Healthcare (+3.52%) and BSE Capital Goods (+4.20%).
The weekly histogram MACD remained below the median line confirming that the bears remained in control. The bulls have staged a smart comeback but the volumes during this rise have been poor, raising a question mark as to its sustainability. Therefore the battle is not over yet as the bears will try to re-assert themselves in the week ahead.
Here are some key levels to watch out for this week.
Some Observations
The bulls have staged a smart comeback but they have to ensure that they do not lose too much ground in the weeks ahead.
1. Resistance in rallies is pegged at 5,109 points and 5,263 points (61.8 and 78.6% retracement levels of the fall from 5,399-4,639 points.
2. The volumes in last week’s rise have been poor implying that this is corrective in nature and should be sold into.
3. The bounce as expected till 1st December has materialized and one should now sell at the beginning of this week and wait for a corrections.
4. Immediate support is pegged in the “gap area” between 4,851-4,916 points. A close of this would be a sign of weakness.
Strategy
A temporary bottom as expected materialized around the 23rd November which did trigger off massive short covering up to 1st December, retracing more than 50% of the recent decline from 5,399-4,639 points. One should sell at the beginning of this week and wait for a couple of weeks to see how far the correction goes as this could determine the future course of the market in the months ahead.
(Vidur Pendharkar works as a Consultant Technical Analyst & Chief Strategist, www.trend4casting.com)
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