Markets Correct…

Review of the Previous day:
The Nifty fell moderately on Friday (April 08, 2011) a net 43.70 points (0.74%) and closed at the 5842 point level. The market opened up at the 5886 points level. It then rose further and registered the days high at the 5927 points level at 9.30 a.m. It then declined sharply into the red and turned into a range bound movement until 2.00 p.m. The index then declined further and registered the days low at the 5822 points level at 2.50 p.m. It then rose and turned into a range bound movement until closing at the day. Sentiment was bearish and amongst the 50 Nifty stocks, 38 were losers, while 12 were gainers. Profit booking weighed on the market and the index closed below the psychologically important 5850 points level. All the sectoral indices barring FMCG and capital goods closed in the red. Heavy selling was witnessed in realty, auto, consumer durables, oil & gas and metal stocks.

Technical Analysis:
Volume:
Volume (Qty shares) increased 15.50%. This change is substantial and indicates a wide participation by investors.

Market Breadth:
Overall Market Breadth on the NSE was negative. Amongst all the traded stocks, 369 were gainers, 1101 were losers and 32 remained unchanged.

Slow Stochastic Indicator:
The Slow Stochastic Oscillator has declined in the over-bought zone.

The Slow K line in the Stochastic Oscillator is below the slow D line (negative if it continues).

RSI Indicator:
The RSI is above the 60 level but is now declining (negative if it continues).

MACD Indicator:
The MACD is above zero but is now declining (negative if it continues). It is above its 9-day Average (positive).

ADX Indicator & DI Lines:
The +DI line is above the –DI line but both lines are converging (negative if it continues).

The ADX is rising while the Market Index is falling, which indicates that the present down trend is increasing in strength.

Moving Averages (Trend Indicators)
The index:
Has dropped below its 5-day average (at 5887) Negative.

Is above its 15-day average (at 5716) Positive.

Is above its 25-day average (at 5620) Positive.

Is above its 200-day average (at 5716) Positive.


Overall Market Strength/Weakness:
The indicators and oscillators discussed here are indicating a strong market but with a negative bias.

Support Levels:
For short-term traders the immediate main support is at 5135 marked as S1 (blue line below the Index).

The next support is at 4795 marked as S2 (blue line below the Index).

Resistance Levels
The immediate main resistance is at 5982 marked as R1 (red line above the Index).

The next resistance is at 6357 marked as R2 (red line above the Index).

Pivot Point Analysis:
For intra-day traders the support and resistance levels are calculated according to the pivot point theory and are:
Pivot point = 5864 (This is the level where the trend is likely to change during intra-day).
Support (1) = 5800.
Support (2) = 5759.
Resistance (1) = 5905.
Resistance (2) = 5969.

Outlook for Today:
On Japanese candlestick patterns the index after having formed three consecutive doji patterns (indicating indecisiveness amongst investors) has formed a black body candle on substantially higher volumes. This is negative and indicates that the bias has shifted towards the sell side of the market. Further, the index has crossed below the 5 days moving average. Moreover, the velocity parameters which were positively trended have now turned neutral. All these indicate a negative bias However, the index continues to remain above its 15, 25 and 200 days moving averages and all the averages are rising. This is positive. Investors are advised to hold long positions but with a strict stop loss at the 15-day average at the 5716 point’s level.

Work with strict stop losses on all positions.