Market Outlook by Experts


Technical Analyst Vijay Bhambwani

Technical Analyst Vijay Bhambwani says the coming week looks to be consolidated with mix trading. He says if Nifty breaks down from 3420 levels then it may touch 3380 levels. He advises that one should remain long.

Technical Analyst Vijay Bhambwani says the coming week is looks to be consolidated with mix trading. He says that he has a positive outlook if the Nifty remains above 3420 levels. He also mentions that if the Nifty breaks down from 3420 levels then there is a possibility that it may touch 3380 levels. He adds that there could be a bull market pressure but it will be like a routine phase of ups and downs but more or less the market may remain steady. He advises that one should remain long.

Anil Manghnani, Modern Shares & Stock Brokers

If the Sensex fails to close above 12016 this week, then we could expect a correction in the near term. One should only buy midcap stocks on deeper corrections in the midcap index.

The Sensex and Nifty are both close to their respective major resistance levels placed at 12016 & 3495. Thus one must wait for these levels to be crossed before taking fresh long positions.

As mentioned last week, the next targets for the Sensex and Nifty are placed at 12016 & 3495 respectively. Both the indices came very close to these targets before correcting slightly. One could expect some selling pressure before these levels on the up side are breached. I do believe that the next move after these resistance levels are crossed could be quite explosive and would take the indices to new highs. However, since the next move could be a significant one, I do feel one should wait for a confirmed break out where the Sensex closes above 12016 for 2-3 trading sessions before one builds fresh long positions. I would rather you buy higher on a confirmed break out than now where you are not sure whether we would first see a correction or a continuation of this rally.

If the Sensex fails to close above 12016 this week, then we could expect a correction in the near term. The immediate supports for the Sensex are placed at 11721-11559-11523-11240 and for the Nifty the supports are placed at 3420-3375-3358-3275.

The midcap index is still in a corrective rally and thus should face stiff resistance at a level of 4567. One should use this rally up to 4567 to exit positions. One should only buy midcap stocks on deeper corrections in the midcap index.


Hitendra Vasudeo

For traders, trading will have to be undertaken with a well-defined stop loss and with well-defined risk per trade before executing any trade as the market can shock at times. Traders can continue to trade long till the weekly trend is up. Investors can look out to book profits and exit long positions as the market tries to hit the upper range of 12100+.

Higher levels prone to resistance

The Sensex shied away form the 12000-mark last week. The Sensex opened the week at 11824.49, attained a low at 11815.43 and moved up to a high of 11983.48 to finally close the week at 11918.65 and thereby showed a net rise of 140 points on a week-to-week basis.

The Sensex is now in the Flat pattern range. The price implication of Flat pattern is 75% to 100% of the preceding move, which in our case, is the falling move from 12671 to 8799. The 75%, 87.5% and 100% of the fall from 12671 to 8799 is placed at 11700, 12187 and 12671. We are above 11700 and knocking on the doors of 12000. In spite of some attempts to touch 12000 last week, the Sensex shied away from it. In anticipation and market consensus that 12000 plus will be difficult to sustain, we witnessed sustained profit booking at higher levels and change of hands last week. In short, we can call the band of 11700-12671 as a broad strong resistance zone. Long-term investors, who are willing to miss some upside moves, can look at the higher range of 12187-12671 as the range to book profits.

Support will be at 11815-11778 and 11651-11619. These support levels are the gaps on weekly and daily charts respectively.

The weekly trend is up since the weekly closing on 28/07/06 of 10680. Since this weekly buy signal, the Sensex has moved to a high of 11983. Traders who were able to follow our weekly update and initiated Nifty trades based on the Sensex movements as recommended would have benefited. The overall trend is the same. Therefore, an uptrend on the Sensex will also mean an uptrend for the Nifty. The difference is in price movements and the discount/premium situation will prevail. But the bottom-line is that the trend is up. Therefore, whatever the situation on the futures premium and discount situation, following the trend is more important.

As the Sensex gets sluggish at higher levels the broad market stocks have done well last week. The broad markets are doing the catching up act against the Sensex.


Let us look at the momentum-based parameters along with the Bollinger Bands. On Bollinger Bands, let us take the 21-day moving average and 2 standard deviation of the average. Along with the Bollinger Bands use ADX parameter to define the momentum. The Nifty gave a breakout and close above 3210 on 09/08/06 and since then the ADX is moving up and is above 20 which indicate that the rise was with momentum and the direction of the rise was up. Therefore, traders trading long had the opportunity to profit on long trades.

Overall on the Sensex, we found the ADX was moving up since the breakout and close above 10940. The Bollinger Bands are moving up but the width of the Upper and Lower Band has got reduced, which means that sooner or later we are going to have wide moves. The wide and strong moves will come in the direction of the price movement. If the support and stop loss of 3377 (NIFTY) and 11550 (SENSEX) get violated, then expect the bandwidth to widen and the fall can be sharper.

On a broader view, therefore, book profits and exit on spurt to higher levels. The Sensex 2 standard deviation upper band is placed at 12056 and is moving up by 30 points every day. The lower band is moving up fast by 65 points and the average is moving up by 30 points. The rising speed of the upper band is slower. Therefore, at higher levels investors need to be cautious.

Strategy for the Week

For traders, trading will have to be undertaken with a well-defined stop loss and with well-defined risk per trade before executing any trade as the market, though showing signs of an upward trend, can shock at times. Therefore, in order not to get caught off-guard by erratic market moves, money management is the key to regular success irrespective of a few failures from the trading point of view. Traders can continue to trade long till the weekly trend is up. Investors can look out to book profits and exit long positions as the market tries to hit the upper range of 12100+.





2 comments:

Piyush said...

Market seems overheated and now the eternal question is that whether to stay invested or get out.Everybody now is expecting a huge correction, But my experience shows that correction never comes at the time when everybody expects. So my advice is to stay invested till 13000.
visit www.sharepundit.blogspot.com

R. John Christy said...

Good Advice. Thanks

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