Charts point to more weakness

WEEKLY TECHNICAL ANALYSIS

The markets witnessed selling pressure, owing to the global financial crisis. A weak pattern on the charts has further confirmed the weakness in the market. The NSE Nifty, which moved in a range of 333 points, from a high of 4,303 to a low of 3,970, finally ended the week with a loss of 260 points at 3,985, a near seven-week closing low.

The weakness was very much evident on the charts, with the widening of the bollinger bands and the index drifting lower. Most of the times, the index has corrected around 30 per cent of its value when it has broken out of a narrow bollinger band, which gives us a target of around 3,150-3,200.

Also, the medium-term (4,315), daily moving average (DMA) continues to be over the short-term (4,245) DMA, which again is a negative indicator. The MACD and Stochastic Slow are also sloping downwards. The only relief would be the 9-day and 14-day Relative Strength Index (RSI), which are around the oversold zone of 30 per cent.

The current downmove will be arrested only if the Nifty manages to close strongly above the 4,300 mark. On the downside, a break of its recent low of 3,800 will see the Nifty testing its long-term (200 weeks) trend line support of 3,640 on the weekly chart and medium-term (50-months) trend line support of 3,520 on the monthly chart.

The Sensex, the Bombay Stock Exchange’s benchmark index, moved in a range of 1,167 points. From a high of 14,221, the index slipped to a low of 13,054 and finally settled with a loss of 940 points at 13,102 on Friday.

The fibonacci study, suggests that if the index breaks the 12,500 mark, it may test the 100 per cent yearly retracement level of 12,100 or further a deep 122 per cent retracement level of 10,300.

Last week, among the index movers, Ranbaxy slumped 24 per cent to Rs 357. Wipro, DLF, Satyam, Hindalco, Tata Motors, TCS, Infosys, ICICI Bank and Jaiprakash Associates shed 10-17 per cent each. On the other hand, Hindustan Unilever gained 3 per cent at Rs 245 and ACC added 1.4 per cent to Rs 605.