Profit booking should be resorted to around the resistance level of 5,742

S&P Nifty close: 5,577.65

Market Trend
 

Short Term: Up                  Medium Term: Sideways                 Long Term: Down
 

The bulls finally succeeded in pushing the Nifty above the resistance line in black. The volumes, too, improved significantly after the drop witnessed last week. The week’s roller coaster saw the Nifty gain 219 points (4.09%) on higher volumes, thus removing the doubts regarding this rise, at least to a certain extent. The histogram MACD, which is above the median level, moved higher indicating that the bulls remain in control.
 

The rise was broad-based as all the sectoral indices, barring pharma, ended in the green. The sectoral indices which outperformed were CNX Realty (+5.53%), CNX Metal (+5.42%), CNX Finance (+4.95%) and CNX Auto (+4.41%) while the underperformers were CNX Pharma (-2.01%), CNX Media (+0.77%), CNX FMCG (+1.09%), and CNX Consumption (+1.54%).

Here are some key levels to watch out for this week

• As long as the S&P Nifty stays above 5,498 points (pivot) the bulls will be in control.

• Support levels in declines are pegged at 5,411 and 5,244 points.

• Resistance levels on the upside are pegged at 5,665 and 5,753 points.

Some Observations

1. The Nifty has decisively broken above the resistance line in black pegged around 5,420 points on high volumes for the bulls to dominate.
2. Now the Nifty seems to be moving within a sharp up-sloping channel (in blue), support from which is pegged around 5,350 points, this week.
3. The resistance line of the same channel is pegged around 5,742 points and one has to book profits if the Nifty approaches this level in a hurry.
4. We completed 13 weeks (Fibo number) from the recent low of 4,770 points hence we are likely to witness some increase in volatility this week.
5. We have completed 87 weeks from the top of 6,338 points (5 November 2010) hence one has to keep a close watch this month end as we head into the 89^th week (Fibo number).

Strategy
The Nifty broke above crucial resistance levels, thus removing any ambiguity as to who is in control. Unless and until the 5,350 points (support in blue) is broken the overall trend continues to be up. From a trading perspective the support is pegged at 5,498 points this week and should be used as a SL on longs. The direction is firmly up and profit booking should be resorted to around the resistance levels for this week, mentioned above.
 

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