Review of the Previous day:
The Nifty fell substantially on Friday (October 15, 2010) a net 114.70 points (1.86%) and closed at the 6062 point level. The market opened up to register the days high at the 6200 points level at 9.01 a.m. It then declined sharply on profit booking to register the low of the day at the 6050 points level at 3.25 p.m. It then turned into a range bound movement until closing at the day. Profit booking could also be due to Coal India issue of Rs 15,000 crore, which opens today. The Nifty moved in a range of 150 points and selling was witnessed across all the sectors. Sentiment was extremely bearish and amongst the 50 Nifty stocks, 47 were losers, while 3 were gainers. Heavy selling was witnessed in IT, auto, banking, metal, oil & gas and FMCG stocks.
Technical Analysis:
Volume:
Volume (Qty shares) decreased 21.78%. This change is substantial and indicates a less than full participation by investors.
Market Breadth:
Overall Market Breadth on the NSE was negative. Amongst all the traded stocks, 343 were gainers, 1064 were losers and 47 remained unchanged.
Slow Stochastic Indicator:
The Slow Stochastic Oscillator is in the neutral zone.
The Slow K line in the Stochastic Oscillator has dropped below the slow D line (negative and a sell signal).
RSI Indicator:
The RSI fell and crossed below the 60 level and is now declining (negative if it continues).
MACD Indicator:
The MACD is above zero but is declining (negative if it continues). It is below its 9-day Average (negative).
ADX Indicator & DI Lines:
The +DI line is above the –DI line but both lines are converging (negative if it continues).
The ADX is falling while the Market Index is falling, which indicates that the present down trend is decreasing in strength.
Moving Averages (Trend Indicators)
The index:
Has dropped below its 5-day average (at 6140) Negative.
Has dropped below its 15-day average (at 6109) Negative
Is above its 25-day average (at 6029) Positive
Is above its 200-day average (at 5312) Positive.
All the averages are positively trended. Positive.
Overall Market Strength/Weakness:
The indicators and oscillators discussed here are indicating a weak market with a negative bias.
Support Levels:
For short-term traders the immediate main support is at 5375 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 6357 marked as R1 (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 = 6105 (This is the level where the trend is likely to change during intra-day).
Support (1) = 6008.
Support (2) = 5954.
Resistance (1) = 6159.
Resistance (2) = 6255.
Outlook for Today:
On Japanese candlestick patterns the index has formed a second consecutive and long black body candle. The body of this candle is below and outside the body of the previous black body candle. This is negative.
Further, the index has dropped below its 5 and 15 days moving averages in a single day. Moreover, the velocity parameters, which were neutrally trended, have now turned negative. All these indicate a negative bias and the possibility of a further decline unfolding.
Investors are advised to avoid buying at current levels.
Work with strict stop losses on all positions.