TECHNICAL ANALYSIS 04112009

NSE India : S&P CNX Nifty - Daily Market Report for: Wednesday (November 04, 2009)

Nifty drops below major support level

Review of the Previous day:

The Nifty fell substantially on Tuesday (November 03, 2009) a net 147.80 points (3.14%) and closed at 4564 point level. The market opened down then turned up and continued so until 11:58 hours when it reached its day high at 4729 points. Then it fell and turned into a range bound movement until closing near the day low. The Nifty witnessed an intraday fluctuation of 191 points. Sentiment was extremely bearish and amongst the 50 Nifty stocks, 46 were losers, while just 4 gained. The Nifty dropped below the 4600 points level for the first time since September 3, 2009. All the sectoral indices closed in the red. Heavy selling was witnessed in realty, metal, technology, capital goods, power and select telecom stocks.

Technical Analysis:

Volume:

Volume (Qty shares) decreased 18.51%. This change is substantial but indicates a moderate participation by investors.

Market Breadth:

Overall Market Breadth on the NSE was negative. Amongst all the traded stocks, 168 were gainers, 1122 were losers and 16 remained unchanged.

Slow Stochastic Indicator:

The Slow Stochastic Oscillator is in the over-sold zone.

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

RSI Indicator:

The RSI fell and crossed below the 30 level and is now declining (negative if it continues).

MACD Indicator:

The MACD is below zero and is declining (negative if it continues). It is below its 9-day Average (negative).

ADX Indicator & DI Lines:

The +DI line is below the –DI line and both lines are diverging (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: Is below its 5-day average (at 4739) Negative. Is below its 15-day average (at 4959) Negative. Is below its 25-day average (at 4979) Negative. Is above its 200-day average (at 3944) 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 at 4672 marked as S1 (blue line above the Index) was crossed below yesterday. The next support is at 4394 marked as S2 (blue line below the Index).

Resistance Levels:

The immediate main resistance is at 5193 marked as R1 (red line above the Index). The next resistance is at 5580 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 = 4611 (This is the level where the trend is likely to change during intra-day). Support (1) = 4492. Support (2) = 4419. Resistance (1) = 4683. Resistance (2) = 4802.

Outlook for Today:

On Japanese candlestick patterns the index after having formed a small black body candle with a long upper tail has formed a 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 is below its 5, 15 and 25 day’s moving averages and all the three averages are negatively trended. Moreover, the velocity parameters are also negatively trended. The index has also dropped below a major support level at the 4672 point's level. All these indicate the possibility of a further decline unfolding. Investors are advised to avoid buying at current levels. Incidentally, since, October 23rd this column had been advising investors to “Avoid Buying”, as we were anticipating a decline. That assessment has proved accurate as the Nifty has lost 424 points since then.

Work with strict stop losses on all positions.