Weekly Technical Analysis - Jan 7 2008

The Nifty made a strong white candle on the last day, in the daily charts and weekly charts also. Both the stochastic are in the highly over bought zone. The 14,3,3 stochastic is still in buy mode. The 5,3,3 stochastic may generate a fresh buy signal with the further rise. The RSI is in the positive mode. However, it is nearing to the over bought zone. The ADX is in buy mode. The swing trade system further traveled in to the positive zone.

The 5-day SMA is providing a good support during the last 10 days on a closing basis. (Presently placed at 6183). Any daily close below this level might be an earlier indication of short-term weakness. The 10-day SMA breached 20 SMA and moving upwards. All these indicate that the undertone is bullish.

In the weekly charts, interestingly, we are getting early signals for the further rally. However, it needs conformation. Both the stochastic and RSI generated a fresh buy signals during the last week. In addition, the reversal of faster line of MACD after nearing the signal line is a very good positive signal for the weekly up trend may continue. The reversal of Nifty from PSAR in the weekly charts, confirms the above statement, barring any short-term weakness.

From the above rationale, the short term upmove might face profit booking on every rise or some weakness. As long as the weekly trend is up, one can assume that the Nifty is able to reach high levels in the coming days, with or without short-term weakness.

Outlook

While commenting on the outlook of the market next week, Iyer said that the Nifty is expected to show some early weakness, which may be a short-lived one. The under tone is still bullish. However, the Nifty is nearing some retracement resistance levels, it may act as a strong resistance on the up move.

The Nifty has resistance at 6305 (strong for short term). Any decisive trade above this level will make the Nifty to reach 6351,6450 and 6499. Anyhow, any daily close below 6153 will delay the up move to these levels.

On the other hand, the Nifty has support at 6222, 6153(on a closing basis), 6114-6130 (strong for short term), 6038 and 5946(strong for medium term).

Strategy

Hold long positions with the stop loss at 6153 (on a closing basis). Add fresh long above 6305. Stock rotation is advised on every rise. One should consider profit booking around the resistance levels.