Another View - 11 Feb 08

Markets likely to test previous lows - Bears in command!
SENSEX (17465) / NIFTY (5120)

In the last Weekly Review, we had discussed the possibility of the Indices moving to higher levels once decisively closing above 18,500 - 18600 / 5,400 - 5450. However, markets failed to hold on to the early gains, thanks to the negative global cues.

On the charts of the Sectoral indices, there are no clear indications.

Pattern Formation:
During the early part of the week, the Indices moved above resistance levels of 18,500 / 5,400 however, could not sustain the gains. Weakness in the global indices and increasing concerns of the slowdown in the US economy led to the turmoil on the Indian bourses. Positive sentiment during early part of the week was negated after the gap down opening of the Indices mid
week and bulls failing to make a comeback. The Indices retraced to 17,203 / 5,034 levels after hitting a intra-week high of 18,895 / 5,545.
On the daily charts of the benchmark indices, 200 Day EMA (Exponential Moving Average) continues to lend support, which suggests that a bounce from these levels may be possible. On the flip side, the breakdown from the ‘Channel’ formation and ‘Island Reversal’ pattern observed on the daily chart of the Sensex suggests that the markets are in a near-term bearish
trend. However, it remains to be seen if the Indices would first bounce from current levels and then fall or otherwise.

Future Outlook:
Breakdown from 'Channel' formation suggests that the Indices are approaching the target of 16,700 - 16,500 / 4,950 -4,920.
Any intra-week bounce to immediate resistance levels of 18,000 - 18,150 / 5,280 - 5,300 may be used to exit long positions.
Volatility seen during the past week may continue to prevail.