Saturday, March 20, 2010

Weekly Outlook Indian Stock Market (22 - 26 Mar)

High: 5269.95
Low: 5101.20
Close: 5262.80
Change: +125.80
RSI (14 Days): 61.38
Pivot: 5211.32
Support: 5153, 5043
Resistance: 5321, 5380

  • On March 19, Nifty future (near month) closed with the premium of 6.80 points at 5,269.60
  • On the last day of the week, the put-call ratio reached at 1.03 times.
  • Average Cost of Carry for the week increased to 5.70%.
  • India VIX (Volatility Index) is at 17.75%, a decrease of 198 basis points from previous week.
  • FIIs turned out to be net buyer in the last 4 trading days.
Resistance: In the week ahead, 5285, 5315 would be huge channel resistance level for nifty. Only if nifty trades above 5315 with volumes, it can move to higher targets of 5355 and 5400.
Support: 5220 would be huge support area for nifty next week. If it breaks and trades below 5220 with volumes, nifty will move down to 5150, 5100 in the week ahead.


March Expiry, 5000 and below is impossible due to huge OI of 5000 Put. Huge OI means, Writers have not yet covered their Put writings, simply because Buyers were bearish and they are now not happy to sell it at peanuts and that allows them to expire these puts at zero price.
5300 Call option is the one which is written mostly by option writers so there is a huge probability that we wont be going above 5300 on expiry. Before Expiry we may see a high of 5300 + (premium of 5300 call 21), so 5320 around max if at all it comes.


Nifty is likely to correct
Nifty witnessed a breakthrough of the narrow trading range during the last week. Though, it commenced the week on a flat note, it picked up the momentum later and breached the crucial 5,150 resistance level. It was confined within a narrow range over the last 8 sessions, with 5,150 being the resistance before breaching the same level decisively. The momentum on the upside was witnessed till the end of the week and Nifty managed to close around 5,260 mark. From here, Nifty looks bearish as all the technical indicators are in the profit booking phase. The RSI and Stochastic have entered the overbought region suggesting a downward move and the MACD is showing maximum divergence and it is about to give a sell signal by crossing below its signal line. As Nifty has its next major resistance at 5,300-5,320, it can continue its upward move until this level before correcting and falling to lower levels. Also, a high volatility is expected in the coming week ahead of the F&O expiry. Downside, 5,200 is the immediate major support and if this is breached, a fall until 5,100-5,050 can be expected. Upside, it can test 5,400 levels if it manages to breach 5,300 levels decisively. Global Markets will remain the key deciding factor for the trend in our market.

Long Term Trend

Nifty is in tortoise rally since almost six months which looks more as consolidation then distribution.(Nifty is trading in 4500-5300 band since more than 30 weeks).
MACD is converging and is ready to give buy signal.
RSI has just broken the downward trendline.

Thanks and Regards

S&P Wealth Creators

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