Reigning The Nifty - 12th October, 2009

 A bearish candle with a lower high and a lower low on the weekly charts on rather high volumes. This was imminent when the evening star pattern formed on the very first day of the week.

Daily Chart

The bearishness continued through the week amongst volatility, but the bulls have been holding on rather well. The earlier low of 4904 was not violated.A head and shoulders pattern is seen on daily charts and the Nifty has held above the neckline.

On weekly charts the rising wedge shown in red dashed line has been violated. This has bearish implications. However Nifty has strong support at 4906 on the uptrendline from March lows.

Weekly Chart

The sensex has taken support on this uptrendline. 

Sensex Weekly Chart

Nifty Weekly Oscillator Chart

The weekly oscillators are yet in overbought region after showing negative divergence,  increasing the chances of some more pullback.The daily oscillators have moved down from overbought region but far away from the oversold zone. The Rsi 14 is yet above the 50 level  but the next support is at low made on September 4th which coincides with Nifty's low of 4580.Keep a watch to see if Rsi14 breaks or holds this support.

Daily Oscillator Chart

Moving averages on daily charts are bullishly aligned but the 5 and 10 emas have converged and the 5ema is ready move under the 10ema.Weekly emas are all bullishly aligned.

Among the sentiment indicators, breadth was negative and volumes high .Put call ratio has fallen to 1.28 from 1.38. All these indicators are supporting the bearishness.

Bullish Price Pattern

Inverse head and shoulders breakout has been maintained for the fifth week.Therefore, the neckline , shown in pink in Chart 1 , becomes strong support. The level for this week is at 4655 .


Bearish Price Pattern

Rising Wedge forming since 26th June 2009 shown in Chart 2 in red dash line. This has been broken adding to the bearishness.The target works out to highest point 5110 less lowest point 3918 = 1192 points move down. Point of breakdown 4980-1190=3790. This is only a technical target and may or may not be achieved.

A head and shoulders pattern with neckline at 4937 on daily charts. Break of the neckline will have a down side move of 200 points.

Conclusion

The Nifty is stuck in a range between 5110 and 4920. A break from this range will give a 200 point move. There are more bearish indicators than we had last week.This leads me to be cautiously bearish . Only a move above 5110  or  a fall below 4904  will set the direction for  Nifty. 4906 is the weekly support of the uptrendline from March lows.

Hedging ones portfolio is very important at this juncture.Remain neutral till more clarity emerges.

Happy Trading !!

Lakshmi Ramachandran
www.vipreetsafetrading.com