Market Outlook for 22 02 2011

Markets opened with a slight negative bias and traded in negative territory for all but last 90 minutes. Nifty dropped to just around 5400 before some strong buying in key heavyweights. IT bigwigs TCS, Wipro and Infosys were the ones that really kick started the recovery and later the others like SBI, RIL and L&T too joined in. RIL came out with its tie-up with BP after the market hours and that should help market to retain the positive momentum. RIL stock should have a positive impact and it is expected to regain four figure mark. SBI has also been resilient and is likely to move up towards 2835-2850. L&T opened on a positive note but then struggled to sustain higher levels and dropped to around Rs 1610. But the rebound from these lower levels suggests that the stock has retained neutral to positive bias and could move up to around Rs1720-25 and then even to around Rs 1765-1775. Overall, Nifty has found support just around 5400 and it looks likely that Nifty may not break 5375-5400 ahead of Union Budget. On the upside resistance could be seen as the markets heads higher to around 5650. Some of the banking stocks like SBI, HDFC bank, Syndicate Bank, Allahabad Bank, BOB, BOI and IOB could see more upside. Others that are looking positive are Welspun Corp, HDFC, Educomp, Sobha, Bajaj Auto and JSW Steel. Nifty has immediate support around 5450-60 and then around 5375-5390 while resistance is seen around 5560-70 and then around 5620.

Todays Sentence

What you have to do is to separate yourself from the money so that you’re thinking of thetrade and not how much money you’re making. That takes a certain amount of disciplinethat’s hard to master, but it’s very important to do if you are going to trade correctly. –George Angell

Stock To Trade 21 02 2011

• HCL TECH :- HCL Tech is giving a bearish signal, bearish on close below 447.
• TCS :- TCS suggests signs of major top, but still pattern is not confirmed. Making bearish H&S pattern.

NIFTY GAINS FOR WEEK, PULLBACK ON FRIDAY

What the Market looks like. We are in an uptrend after a sharp decline. This should be considered a relief rally. But, as rallies go, the market can go up and give a lot of relief. However, the long term trend remains down. We should expect lower levels in the next few months. Nifty Watch:- The Nifty opened at 5566 with a gap of 16 points. The Index quickly made a high at 5589, and then moved down to its day low at 5436 with a decline of 153 points to its day high and finally closed at 5468 with a decline of 98 points to its open.

Today’s market decline may be a correction of the ongoing short term up trend. As we have discussed yesterday, traders should have taken partial profits in the morning when the Nifty was touching 5600. Any remaining short term positions should have been stopped out at 5500.

Trend:- The short term trend is remains up despite today's correction. A close below 5350 is required to change this trend to down.The Intermediate trend remains down, with the Nifty trading below its 200 days and 50 days moving average. We may see choppy market conditions next week with markets responding randomly to various pre-budget events. Fresh buying is suggested if and when the Nifty closes above 5550. These levels will change over time.
TA Insync(55-5) is now above the level of -45 and still moving up. This indicator is suggesting upside momentum.

Level:- Looking for support at 5460, then 5350. Major resistance comes at 5550. After a rally of 414 points this week (from 5175 to 5589) nifty may start a consolidation. Thus coming few days may be trading between the ranges of 200 points - 5350 to 5550

Summary:- As Budget will come in next month thus the market may start consolidation before the budget. This can lad to choppy market conditions. Below the fibonacci retracement down levels are shown in the chart. We note that the Nifty has corrected 38% of the up move. This was the minimum requirement. We could expect a correction towards 50% - 5382 or even 61.8% which will be 5333. Therefore, it is wise to wait till the Nifty either moves up above 5550 or
remains stable at any one of the retracement levels.

Market Outlook for 21 02 2011

The ongoing 5 day rally was cut short abruptly and violently on Friday as Nifty slipped more than 150 points from its intraday peak of 5600. Nifty had rallied another 50 points in the morning session before selling in most heavyweights pushed the indices lower. Selling was seen across the board as bears pounced upon the opportunity. The infra and realty were the first to lose ground but even the banking counters encountered a drubbing. Still, Nifty ended the week with a gain of around 2.8%. Banking index emerged as the biggest gainer with Capital gains and metals index following closely. All sectors finished the week in green. But, as we enter the expiry week for the Feb series the momentum may have shifted towards the bearish scenario as the volumes on Friday were huge. 5350-70 would be the first significant support zone on the downside and while it was broken without much sweat, it is expected to provide some strong support this time around. But more than the technicals, it’s the other happenings that could impact the markets. Monday happens to be the beginning of Budget session and traders and investors would be watching it with anxiety and nervousness. If the parliament is not allowed to function properly then it would provide more fodder to the confident bears and would be a big negative. Then, the CBI enquiries into 2G scam is another event that’s causing much nervousness and there’s always a question hanging in air, ‘who’s next’. Even Friday’s session was hot on various rumors and that may have added to the unwinding/short selling. And then, we have not even touched upon the various international events, be it Middle-east crisis or tightening by China. So, overall next week is expected to be extremely volatile and it would be foolhardy to anticipate anything. As for technical levels, as mentioned earlier 5350- 5370 should be the first hurdle for bears while more support is seen around 5280-5300. Drop to the second support could be utilized for some bargain buying in banking and Capital Goods/infra counters. On the way up, 5510-25 would be the initial hurdle while strong resistance is likely around 5575-5610.