BSE Sensex witnessed profit booking

if you born poor it's not your mistake, But if you Die poor it's Your Mistake - Bill gates

After the strong up move in month of January 2012 Sensex continued its upward move in month of February and touched a high of 18500. Sensex witnessed profit booking at higher level and corrected approx 800 points from the high of about 18500 to close at 17750 with gains of 3.25% from the close of previous month. Sensex has exhibited very volatile movements in last week of February.  Sensex is currently trading above its bullish breakout level of down sloping channel on weekly chart and showing enough strength to hold the 17300 channel upper trend line support. Most of the index stocks moved up sharply and are consolidating above short term breakout levels, exhibiting strength to move up further. Sensex chart pattern indicates 18000-18200 is likely to act as resistance zone on any pullback action, Any breakout above 18200 on closing basis would attract more buying in the market and Sensex can then move up to 18800-19200 in short term.

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Fibonacci retracement on weekly chart (of the move from 15135 to 18523) suggests that 33% retracement exists at 17395. We expect that any corrective action in near term is likely to take support in range of 17300-17400. If it fails to hold this level then it could fall down to the 16800 and a weekly closing below 16800 will change the trend triggering more selloff in the market up to 16200-15800 in a short period.

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Sensex weekly strength indicator RSI is slanting downwards; however, it is placed above its reference line indicating sustained strength at lower levels in short term, while Daily RSI has given the negative crossover from its overbought territory suggesting that Sensex could face selling pressure in near term.  However, Short term momentum oscillator Stochastic and Short and near term MACD are placed in the positive zone indicating strength.

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We, hence, expect Sensex to trade in a volatile range of 19200-16500 for the events loaded month of March. Preferred strategy is to buy bullish stocks on dips near their major support levels. Sensex is expected to be Positive in the near and short term while medium trend continues to be bearish. Sensex daily chart suggests that important support levels are 17300-16800 while 18200-18800 are the major supply zones.

S&P CNX NIFTY

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Nifty continued its upward momentum in month of February 2012 and touched a level of about 5600 where it witnessed profit booking and corrected in the last week of February to close at 5385 with gain of 3.58% compare to previous month. Nifty managed to hold its bullish breakout level of weekly down sloping channel of 5235 during corrective move in the last week of February. After strong run-up in last two months most of the Index stocks are now in consolidation mode and trading above their short term breakout level.  Nifty daily and weekly chart pattern indicates 5500-5550 is likely to act resistance zone on any up move. Any breakout above 5550 on closing basis would attract more buying in the market and it can move upto 5650-5800 in short time.

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Fibonacci retracement on weekly chart from 4531 to 5629 level suggests that 33% retracement exists at 5265, We expect that any corrective action in near term is likely to take support in range of 5300-5200. If it fails to hold this level then it could fall down to the 5050. We expect weekly closing below 5050 will change the trend and it would trigger more selloff in the market which may slide up to 4900-4700 in short period.

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Nifty daily RSI placed above 70 into overbought territory has given the negative crossover suggesting that Nifty could face selling pressure in near term, while Nifty weekly strength indicator RSI is slanting downwards. However it is placed above its reference line indicating sustained strength at lower levels in short term.  Short term momentum oscillators are in positive territory and Daily momentum oscillator stochastic has turned up with a positive crossover from the oversold territory which supports bullish momentum in the near term. Short term and near term MACD indicators are placed in positive zone suggesting index may gain strength in short term.

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Nifty is expected to remain volatile in near term, Nifty short term trend continues to bullish while medium trend continues to be bearish. Nifty chart pattern suggests that 5500-5650 would be major supply zone for Nifty. Major correction in Nifty is expected to get good support at 5200-5050. We expect Nifty to trade in range of 5050-5700 levels in the events loaded month of March. In present market conditions stock specific approach and buying bullish stocks on dips near their major support levels would be more rewarding.