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Volatility may continue with markets keenly awaiting the outcome of the US elections
The domestic equity markets have been choppy over the
last couple of weeks. Bellwether indices have seen sharp intra-day
volatility. These movements have been led by global events. The
volatility is likely to continue in the coming week with markets keenly
awaiting the outcome of the US presidential elections due on November 8.
Nifty 50 (8,433.7)
The
Nifty 50 index lost more than 2 per cent over the last week. It
breached a key support at 8,500 and closed at nearly a four-month low.
This week:
A couple of weeks back, the index tested the key resistance at 8,700
and also the 21 as well as 50-day moving averages but failed to move
past them. Subsequently, the index resumed its short-term downtrend that
has been in place since the early September peak of 8,968. On Friday,
the Nifty fell 51 points or 0.6 per cent and decisively closed below the
key support at 8,500. This decline has strengthened the downtrend. The
daily relative strength index features in the bearish zone and the
weekly RSI is charting downwards in the neutral region. Both the daily
and weekly price rate of change indicators hover in the negative
terrain, implying selling pressure.
Short-term
outlook is bearish. The index can extend its decline to 8,400 once again
and then to 8,300 in the coming week. Traders with a short-term
perspective can make use of the intra-day rallies to initiate fresh
short positions, while maintaining a fixed stop-loss at 8,620 levels.
Key supports below 8,300 are at 8,240 and 8,200 levels.
On
the upside, the index needs to decisively breach the immediate
resistance at 8,500 for the corrective upmove to extend to 8,550 and
8,600 levels. Only a strong breakthrough of 8,600 and 8,700 will show
signs of optimism and take the index northwards to 8,800 and 8,900 in
the short term.
Medium-term view: The key
support in the range between 8,500 and 8,550, which was providing base
since mid-July, failed to hold up last week. This has increased the
possibility of a decline to 8,300 initially and then to 8,150 — the 38.2
per cent Fibonacci retracement level of the prior uptrend in the
medium-term horizon. Next significant support is at 8,000 levels.
Investors with a medium-term perspective can consider taking partial
profits off the table at this juncture and staying invested with a
stop-loss at 7,950. Strong rally beyond 8,900 can take the index higher
to 9,000, 9,100 and 9,300 levels.
Sensex (27,274.1)
In the truncated week ago, the Sensex fell 2.4 per cent, breaking the key support at 27,500 decisively.
This week:
The Sensex, which had closed marginally above the 28,000-mark a couple
of weeks back, failed to sustain its bullish momentum. While trending
down, the index breached the key supports mentioned earlier at 27,800
and 27,500. The short-term outlook for the index is bearish. It can
continue the downtrend that began from the early September high of
29,077. Key supports to note are at 27,000 and 26,730 levels. Strong
rally beyond 27,500 is required to bring back positive momentum and take
the index higher to 27,800 and then to 28,000.
Medium-term view: The ongoing decline is a threat
to the medium-term uptrend of the index. As long as the index trades
above the support band between 26,200 and 26,500, the uptrend can remain
intact. But an emphatic slump below this band will intensify the
bearish momentum and pull the index down to 26,000. Conversely, a
break-out of 29,000 is needed to take the index higher to 30,000 in the
medium term.
Bank Nifty (19,058.1)
Last week,
the Bank Nifty slumped 2.4 per cent and is testing the key support at
around 19,000. A downward breakthrough of this base will increase
selling pressure and pull the index down to 18,800 and then to the
18,500-18,600 band in the coming weeks. Traders with a short-term
perspective can initiate fresh short positions on a decisive fall below
19,000 levels with a stop-loss at 19,250. The index trades well below
its 21 and 50-day moving averages. Key immediate resistances are at
19,300 and 19,500. Next resistances above 19,500 are pegged at 19,800
and 20,000.
Global cues
Last week, the Dow
Jones Industrial Average declined 1.5 per cent, breaking the range-bound
movement between 18,000 and 18,400. Short-term trend is down. The index
can decline to test the next support at 17,800 and then at 17,600 in
the near future. Key resistances are at 18,000, 18,100 and 18,300.
The
Nikkei 225 index encountered resistance at 17,500 and slumped 3 per
cent in the previous week. Immediate support is at 16,500. Resistance to
note is at 17,235.
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