Markets on February 13: Negative divergence

Domestic indices started the day on a healthy note, but soon dropped from the day’s highs and traded in a small range until mid afternoon, when markets gave a positive breakout from the small range cheering the bulls. However in the last minutes the markets pared gains yet closed in the green. Weekly charts depict that Nifty is facing resistance around 20-weeks simple moving average (20-WSMA), and until this average is cleared on closing basis, chances of bears stealing the game from the hands of the bulls is higher. On hourly chart, though Nifty has given a higher top higher bottom signal, but the momentum indicator KST, which is having a negative divergence, does not support that signal. Daily KST is still positive. Market breadth was positive. For every single loser, there were 1.5 gainers.

On the hourly chart, the gap between the momentum indicator KST and the signal line is getting slimmer and negative crossover is about to occur. Both our short- and mid-term biases are down for the target of 2775 and 2450 respectively with the short- and mid-term reversals are pegged at 2960 and 3111 respectively.

Sensex and Nifty closed higher, up 169 points and 55 points respectively. BSE Midcap and BSE Smallcap indices also closed stronger, up by 1.5% and 0.6% respectively. Stocks from metal and realty led the gainers, while health care stocks led the pack of losers. From the 30 stocks of Sensex Mahindra & Mahindra (up 7%) and Reliance Communications (up 5%) led the pack of gainers. On the other hand Sun Pharmaceutical Industries (down 3%) and Ranbaxy Laboratories (down 0.5%) led the pack of losers.

(Disclaimer: The above chart shown is for study purpose only and not for trading decision)

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