Though the market opened above the previous day’s high,it kept on weakening and making new lows on account of profit taking throughout the day. The Sensex closed lower by 337 points, while Nifty closed lower by 115 points.Stocks from the mid-cap and small-cap space ended the day on a weak note as well. On the daily candlestick chart,the Sensex has formed dark cloud cover, which is a bearish reversal pattern, which indicates that the current rally has come to a pause. From here markets can retrace back up to 38.2 % of the entire rally (from 2539 up to the recent high). Below that the 20-daily simple moving average is also a good level where again one can see demand coming back. On the hourly chart, Nifty has broken the support of 20-hourly simple moving average and once if surpass 40-hourly exponential moving average, then 3150 can not be ruled out. The daily momentum oscillator KST is highly overbought, which indicates that the current momentum cycle is about to get disrupted. The overall decline to advance ratio at the time of closing stood at 4 to 1 on the BSE.

The hourly KST has given a negative crossover, after the third negative divergence. Our short-term bias is revised down for the target of 3150 with reversal pegged at 3550. However, our mid-term bias is still up for the target of 3650 with the reversal nailed at 3050.

Except for stocks from the fast moving consumer goods space, selling activity was witnessed in stocks across sectors led by realty, metal and capital goods. From the 30 stocks of Sensex ITC (up 3%) and Wipro (up 3%) led the pack of gainers. However Tata Motors (down 13.5%), Reliance Infrastructure (down 9%) and DLF (down 9%) led the pack of losers.

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

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