Om Sri Ganeshaya Namaha

Om  Sri  Ganeshaya  Namaha
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Monday, September 21, 2009

Reigning The Nifty - Weekly Analysis

Last week my diagnosis was that the Nifty was not too healthy. The Nifty however continued to  climb the wall of worry and gained  150 points over last week  after briefly touching  the 5000 level.  So, is  the Nifty robust once again ?

Weekly Charts

Weekly Chart  1

Weekly Chart 2


All oscillators are rising but have been in negative divergence  since  May 2009 when they all hit highs in overbought terriotry and have since then been unable to reach those highs, whereas the Nifty has continued to make new highs

Moving Averages 

The short term and long term moving averages are in bullish alignment since June 2009 and consequently the disparity between price and the moving averages is increasing which increases the possibility of a contraction.

Sentiment Indicators

Market breadth was positive for the week.
Put call ratio which was at 1.66 last week increased to 1.73 this week supporting the theory of  "climbing the wall of worry".

Bullish Price Pattern

Inverse head and shoulders breakout has been maintained for the second week.Therefore, the neckline , shown in pink in Chart 1 , becomes strong support. The level for this week is at  4707 .

Bearish Price Pattern

Rising Wedge forming  since 26th June 2009 shown in Chart 2 in red dash line. This will be invalidated if Nifty breaks out above the uppertrendline which offers resistance for the week at 5150. Support at the lower trendline is at 4800.

My View

Last week I suggested booking out of remaining longs so that the elusive correction would not eat into the profits made . I suggest the same once again of continuing to book profits as and when one is in profits. The Nifty has been moving in an upward moving channel since March 2009 lows, shown in Chart 2 , and is now at the lower end of it .  Unless the  Nifty breaks down from this channel ,the upmove will continue.Support from this channel is at  4670 for the week. Bears should wait for a decisive break of this level to get active.

Meanwhile, the Bulls rule !

Happy Trading !!

Lakshmi Ramachandran

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