Friday, March 28, 2008

Another round of sell-off likely

From a news source:- NEAR-TERM indicators on charts are pointing to further weakness in the market, with the Nifty yet to close above a crucial resistance level of 5,368 points (though it was tested last Wednesday). With global markets also ending lower on Friday, the market should see another round of sell-off.

Technically, the Nifty has support at 5,181 (10-day exponential moving average (EMA)). But the index, last week, moved below 5,181 twice, which can be treated as an early indication of another round of sell-off. Further on the lower side, the Nifty has strong support at 5,052 (200-day simple moving average). A close below this level for more than two days can cause a major sell-off, and in that case the Nifty may test 4,803.6 (the previous bottom recorded on February 11) first and then could move down towards the panic bottom of 4,448.5, which recorded on January 22.

If the Nifty manages to close above 5,368, it can negate the downtrend in the short run, and can take the index towards 5,600 levels. The index will need a lot of support from heavyweights like Reliance Industries, ICICI Bank, ONGC and Bharti Airtel.
Reliance Industries is the lone counter with strong supports at the moment. But if the stock falls below the Rs 2,375-level, then it may find support only at Rs 2,304, because the 3-,9-and 18 simple moving average combination can give a sell signal.

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