Daily Call - Feb 9 2010

Euro zone’s sovereign debt concerns came haunting again as US markets closed with nearly 1% cut after briefly flirting with the positive territory in the first half of trade, led lower by financial shares.

While our markets bounced back smartly in the latter half of the trade, the sustainability of such moves is a big question mark. The gains made merely on the back of short covering are not sustainable, unless followed up by fresh buying. FIIs provisionally sold worth Rs. 935 cr in cash segment and 295 cr in index futures yesterday. Nifty took the resistance at the upward sloping trend line joining bottoms of August and November 2009 which earlier acted as a support. While On the move up, Nifty will encounter various resistances, including yesterday’s high placed at 4799, the upper band of the gap down opening on Friday placed at 4832 and 61.8% retracement level of the fall from 4951 to 4675 placed at 4846, the toughest one is placed at 4950, which happens to be the previous top. We have been advising sell on rallies since Nifty broke 5170 and traders who would have followed our advice would be a happier lot as market has been consistently coming down after brief rallies. Sell on Rallies still remains the advice and only a decisive close above 4950 will only negate the bearish view. Yesterday’s Low of 4675 is the immediate support.