Daily Technical Analysis - July 7 2009

There was a sea of red splashed across trading screens on Monday as the Sensex and Nifty nose-dived 5.8 per cent. Market participants went on a selling spree, irked at the continuation of STT, increase in MAT and lack of policy direction in the Budget document.
Sensex (14,043.4)

Short term

The giant engulfing candle in the daily candlestick chart has made the short-term trend in Sensex turn downwards. The daily momentum indicators too corroborate this view. The short-term support that Sensex is clinging to is 14,016 that was the trough formed on June 23. A close below this level will take the index to the 50-day moving average at 13470 and the floor of the gap formed after the election result at 13479. In other words, despite the sell-off on Monday, the index is approaching key support zone from where a short-term rebound is possible. Strong close below 13500 is needed to make the medium-term view negative in the index.

Medium term

As indicated in the index outlook column published on July 5, the medium-term trend is under pressure. As the index is reversing from the key intermediate resistance zone between 15200 and 16200, a medium-term peak could have been formed at the June 11 peak of 15600. Failure to move beyond 15000 over the next two weeks will confirm this view.
Nifty (4,165.7)

Nifty too recorded a bearish engulfing candle in the daily chart and it closed below the recent trough at 4143 that is negative from a near-term perspective. But the index has strong support at 4100. Close below this level is needed to pull Nifty to 3884 or 3544 over the medium term. Close above 4500 is needed to make the short-term view positive in Nifty.

via BL