Hello,
Last week we mentioned that we may see a break of 5400 coming in during the week and Nifty briefly did break the 5400 level but was unable to sustain at the higher levels and climbed down a bit. We closed the week in positive territory though the trend seems to be weakening as new highs generally generate more momentum and we failed to do the same this week despite breaking many strong resistance levels.
What we seem to be seeing is a classic case of "Test of Supply". Nifty tested the 5400 level and met with a Supply zone which has meant a retraction for now. This week can turn out to be crucial in understanding as to where we go from here. On the positive side, FII's are still buying strongly which means that at every reaction, market will get support unless the FII's start reversing. On the Negative side, we still have the US / European markets to deal with. Unlike our markets, US Markets are structurally pretty weak and is facing pretty strong resistance & can weaken the sentiments going forward from here.
In terms of Candlesticks, this weeks bar comes very close to being a Dragonfly Doji. The last time we saw such a pattern was in first week of Jan10 after which market preceded to have a reaction that lasted for the whole of January. With US markets closing pretty weak on Friday, we can expect to open negative and if we were to break & close below the 5335 level, weakness can persist for some time to come.
Regards
Prashanth
Mythri Stocks & Shares Pvt Ltd.,
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