Technical Outlook for the week starting on 28/04/2008

The Nifty witnessed positive momentum on the first and last trading day of the last week. The Nifty opened at the lowest level of 4955.90 and closed at 5117.70, near to the weekly high of 5117.70. The Nifty continued it's previous two-week's northward journey. The volume was comparatively better. The April month series expired smoothly. However, the roll over was not so enthusiastic in the sense that no aggressive build up position was seen.


In the daily charts, the Nifty formed a long white candle pattern on the last trading day of the last week. (Almost Marubozu pattern). The previous three days patterns are reputed to be a continuous pattern. The Nifty closed above 5,10,20 and 50 day SMA. The Nifty was able to close above 89 day EMA, since 18/01/2008. However, the Nifty is expected to face a good amount of resistance from the long-term averages of 100 and 200 day SMA. The sustainability of the close above one of the crucial EMA and long term SMA can need a minimum of three days closing. Any failure can make both the averages more stiff resistances.

The 5,3,3 stochastic reversed from the over bought zone. However, the 14,3,3 stochastic is about to give a fresh buy signal in the over bought zone. As both are being in over bought zone, after an upward move or some more day's range bound and volatile move, the possibility of weakness is there. To add strength to the short-term bullish trend, the RSI generated a fresh buy signal. The MACD and PSAR are in buy mode.

One can expect the continuation of the ensuing positive move upto 100 day SMA (5154) or slightly more than that with the increased volatility near to that level. The short-term trend may witness a pressure near to the above-mentioned level and further weakness can be expected.

In the weekly charts, the White Opening Marubozu formation was seen, which is normally a single candlestick pattern with low reliability. Normally, it is to be interpreted with other indicators, oscillators and the evidences. The Nifty is closed well above the 5 and 10-week SMA.

The "14,3,3" stochastic is out of the over bought zone. The "5,3,3 Stochastic" entered into the overbought zone. The medium term trend is still weak with possibility of reversal with or without one more fall.

In the monthly charts, the MACD is in a sell mode. However, the bottom of 4448 is becoming a strong support. Any decisive breach, will initiate a fresh down movement. The 20-month SMA is giving a good support since 30th May 2003 on a closing basis, which is currently placed at 4581.

In the quarterly charts, since October 2003, the Nifty is trading above PSAR. For this Quarter it is placed at 4448.50

Outlook for the Week

Possibility of facing resistance, but yet to get signs.

Based on the above rationale, the Nifty is expected to see some more initial positive move. On many fronts, the Nifty is near the resistance or over bought zone. Any failure to clear those resistances will lead to weakness. For this week, the Nifty has support at 5075,5056,4978-4994(short term trading support), 4916-4936(below a possibility of further weakness) and 4856 (a fall below fresh weakness may emerge) and 4556. The Nifty has resistance at 5154,5216,5343,5403 and 5480.
Strategy
Short-term traders can use any failure to clear the level of 5154 decisively, to exit long positions. Traders should use any declines to add long positions around 4856.