For the week ended January 2, 2009, Nifty Futures closed nearly 6.49 % higher. In the process, it gave a technical bullish signal of having an upward Bar Reversal pattern. Generally, it gives a very good signal provided, there is follow up support. This bullish week witnessed four positive closing days and only one negative closing. Most of the days, markets witnessed intra day correction and smart recovery in the second half to give positive closings.

During the week, inflation gave a further positive surprise by reducing to 6.38 % vs 6.61 % in the previous week. Crude is now howering around $40 levels. It is expected that Inflation would continue its downward journey. This would result in lowering of the interest rates (cuts have just been announced by RBI) and hopefully may result in the economic activity picking up so that slowdown can be arrested. Falling of crude may result in lowering petrol / diesel prices which would further result in cooling the inflation.

On the Nifty’s Daily Chart, 200DSMA stood at 4063.04 (Falling), RSI is at 56.41 (Rising) and Momentum Indicator is at 32.39 (Falling). These parameters indicate that for the bulls to continue to be in the picture, momentum is necessary, otherwise, bears would sneak into bulls territory.

On the weekly chart, 20WEMA stood at 3356.27 (Bearish), 30 WEMA is at 3661.63 (Bearish), RSI stood at 40.44 (Bullish), Momentum Indicator is at 53.48 (Rising) and MACD at -428.65 (Bullish). Thus, all except long term averages favour the bulls.

Nifty Future has support at 3000, 2920 and 2865 levels. It will face resistance at 3125, 3240 and 3375 levels.

In the forthcoming week, till the time Nifty remains above 2865 (closing basis), bulls would have an upper hand and would try and make an attempt for 3240-3300 level. The stimulus package and rate cuts announced on January 2, 2009 (late evening) aided by good global cues could have a positive start to the week. It must however be remembered that we are currently labelling this rise as only a bear market rally and not as a new bull phase as it appears to be the second leg of the rise from the October 2008 lows.

Thus, it is a trader’s market and investors/traders must trade with targets and stop losses in place. For the time being, it appears that it would be profitable to be long.

(The author is fund manager at Dawnay Day AV Financial Services)

source: Economictimes

Tags: calls, daytrading, free calls, intraday, tips

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