Indian Stock Market Technical Analysis by Pinc Research

Even though we had expected a subdued move, the intensity of the fall foxed a lot of market participants including us. There was a sense of complete disdain when the bears almost prevailed over the bulls esp during the latter half of the week.

So is the capitulation like situation that resulted in the Nifty tanking over 250 points for the week hints of any ceiling in the near future. Based on the market movement for the last week, we have reviewed our take on the markets and currently have to take a wait and watch approach until clarity emerges out of this chaos of events. Taking a purely technical view, the markets have been deeply oversold anyway for the last two to three sessions. This suggests that the present decline may not have much steam left in time. However, how the market responds to these deeply oversold conditions remains to be seen in the next few days. Given the speed at which the market has declined at best we can expect a dull trend with a negative bias over the next week or so. On the upside, the level of 5450 remains a hurdle and until this level is crossed the market should be assumed as weak.

As far as the Mid Cap Index goes, we suggest a neutral view as the benchmarks eems to be in a puddle.

Commodities: Aluminium could remain subdued and trade inside a broad trading range. Zinc and Copper could remain muted in the coming week. In Bullion, Gold’s uptrend is intact. Silver can see further declines if resistance of $42.00 is not breached. Crude can see further declines.

Currencies: The USD/INR can further advance above 44.80. Euro/Dollar remains sideways with a negative bias. Dollar/Yen’s trend could have reversed. DXY is trading sideways in a trading range and a breakout above 76.00 could result in further rise.

The oscillator is currently in the oversold zone (refer chart) with a positive crossover.

By the time the week ended, the Nifty has formed a ‘hammer’ pattern indicating that sellers may be tiring at lower levels.

We had enlisted in the previous report that the medium term technical indicators are neutral which could assist the markets swing either sides depending on the outcome of the events. The Nifty declined considerably as an after shock of these events. After the sharp fall, the Nifty is in the midst of short term weakness which will exist as long as it trades below 5450. Having said that, the short term technicals are in deeply oversold conditions and also exhibiting a positive divergence signifying a bounce back could be brewing. The appearance of a “hammer’ pattern also stands confirmed if the Nifty has a positive closing on Monday. This too supports a positive undertone in the short term. We prefer to be on the sidelines at this moment and observe the nature of the bounceback as that would help us project the trend further.

The indicator is in the oversold and has made a positive crossover. Such a buy signal should support the positive undertone of this index in the short term.

The index tested the important support level of 7500 which is also an area of double bottom.

The Midcap Index slipped after drooping around the level of 8000 for quite some time. Its short term technical indicators are highly oversold indicating that downsides are minimal and a pull back could be round the corner. Also, in terms of price pattern, this index has a strong support around the area of 7500 which is a double bottom. These factors indicate a positive undertone for this index and an intermittent rally remains a high possibility in the short term. We would however not like to make any conclusions at this stage as we watch the nature of this bounce back. The study of the bounceback can lead to further projections of the trend.