Bulls have to defend 5,171 points to prevent further battering

Vidur Pendharkar 24 March 2012

Strong resistance is pegged in the 5,385-5,425 points range and unless and until this is taken out the bulls would continue to be under pressure. One should persist with the strategy of selling in rallies especially close to the above mentioned area

S&P Nifty close: 5278.20

Market Trend
Short Term: Sideways Medium Term: Sideways Long Term: Down

The Nifty opened marginally better and tried to cross the weekly pivot of 5,374 points but failed, resulting in another bout of selling which saw the Nifty decline precariously close the recent low of 5,171 points (low this week 5,205 points). However the bulls succeeded in defending this low thus averting further selling pressure. In a week of see saw trade the Nifty finally closed the week 39 points (-0.75%) lower.

The sectoral indices which outperformed were BSE Fast Moving Consumer Goods (+2.71%), BSE Healthcare (+1.77%) and BSE IT (+0.43%) while the gross underperformers were BSE Metal (-2.54%), BSE Power (-2.50%), BSE Oil & Gas (-2.20%), and BSE PSU (-1.32%). The weekly histogram MACD continued to move down but is still above the median line indicating that the correction is still on. However the volumes were lower during the decline compared to the previous week.

Here are some key levels to watch out for this week

As long as the S&P Nifty stays below 5,289 points (pivot) the bulls would be under pressure in the near term even though the intermediate trend is sideways.
Support levels in declines are pegged at 5,193 and 5,109 points.
Resistance levels on the upside are pegged at 5,374 and 5,470 points.

Some Observations
1.    The Nifty failed to close above the pivot last week which resulted in further bull liquidation.
2.    Weekly averages still continue to be negatively phased hence a dip below these would result in the selling pressure accentuating.
3.    Unless and until the previous week’s high (5,385) is taken out in close the bears will hold the edge and a break of the recent low of 5,171 points would set the cats amongst the pigeons.

Strategy
Strong resistance is pegged in the 5,385-5,425 points range and unless and until this is decisively taken out the bulls would continue to be under pressure. One should persist with the strategy of selling in rallies especially close to the above mentioned area. A breach of the recent low of 5,171 points would spell more trouble for the bulls taking the Nifty down to 4,986 or 4,811 points in the weeks ahead.

(Vidur Pendharkar works as a consultant technical analyst & chief strategist at www.trend4casting.com)

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