As mentioned yesterday, Nifty which had risen by more than 400 points in last 5-6 trading sessions was in extremely overbought zones with multiple negative divergences which initiated decline & achieved the target of 5465 within intra day. At the same time Nifty, which has already given breakout from a bullish "Declining Channel" pattern (target of which is 5800-5825) is making another bullish pattern i.e.
Inverted Head & Shoulder" pattern may come down to 5375-5425 to make right shoulder of this pattern. On the bearish side if Nifty closes below 5180 or fails to move out of "Declining Channel" pattern, the bullish outlook will get negated. The chance of bounce back are high on expectation of favorable budget next week.
Nifty opened on a flat note as global markets were mixed & narrow. Nifty gradually lifted lower on various political uncertainties to touch an intra day low of 5413 & as soon as it was clear that JPC would be announced soon. Nifty shot up by more than 100 points to touch 5526 before settling at 5519, about 60 points above the previous close.
As far as, extreme short term charts are concerned, Nifty has been making a kind of "Inverted Head & Shoulder" pattern with head at 5577 & right shoulder at 5413 & the neckline resistance at 5600. If no distortion happens in next 2-3 days, Nifty can be expected to touch 5800-5900 in coming sessions.
On the other hand, budget can always change the fundamentals & technicals in one stroke & all the analysis will have to be redone in case of any structural change in the economy. Coming to extreme short term after a rise of nearly 115 points in last 90 minutes Nifty can lose 40-50 points before moving up. Therefore great caution needs to exercised in positions on both sides.
As far as bar reversal in Daily charts are concerned, stocks like Nifty, Nifty Junior, Nifty Futures, Infosys, TCS, ICICI Bank, L&T, JSW Steel, LIC Housing, Hindalco have given "Upward Bar Reversal" while Core Projects, Sterling Biotech, MIC Electronics etc. have given "Downward Bar Reversal". Stock like JHS Sevendgaard, Brandhouse Retail, Motherson Sumi, National Fert., Take Solutions, Wipro Ltd., Bata India, Nag Fert., Hexaware, Jindal Photo have shown spurt during the day with unusually high volumes.
Sector wise, most of the stocks like Brand House, Insecticide, Welcorp., Edserve, Petronet, Educomp, Bal Pharma, ADSL, Titan etc. were among the top gainers of the day, to close in positive territory whereas stocks like EIH Ltd., Venkeys, Camlin, Jai Corp., Geodesic, MIC, Tulsi Extrusions, On Mobile,Ankur Drugs, Jet Airways etc. attracted profit booking at higher levels & closed in red territory. As far as, A/D data is concerned it was in favor of bears in the ratio of 6:7 with 649 advances & 770 declines during the day.
In nutshell, Nifty is making a kind of "Inverse Head & Shoulder" pattern (subject to confirmation) with neckline resistance between 5560-5600. In case of bullish breakout with volumes, Nifty can be expected to touch 5850-5900 in coming weeks. But with budget around the corner any shift in economic policies can change the fundamental & technicals of the market as well as of individual stocks.
Therefore volatility may rise in coming days on various rumors about budget provisions etc. One should be extra cautious in this period & willing to take small profits also if required.
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