The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall StreetThe NSE Nifty moved in a band of 129 points — from a high of 5,339, the index dropped to a low of 5,210, and finally ended the week with a loss of 32 points at 5,237.
The market may have tumbled but it was not as bad as it appeared; the market breadth did not collapse and the decline came on lower volume. Also, outflows from the foreign funds were only marginal in the cash segment. Given that backdrop, it is expected that the market may resume. However, early warning signs are coming from the MACD, which has turned negative, and also the Directional Index, which indicates that the strength of the upmove is weakening. The Stochastic slow is also declining.
Short-Term Profit Hunter: Stochastics, Moving Averages and the Mindset to Make You a Winning Trader
In spite of this, the major trend continues to remain bullish as the short-term moving average is above the medium-term moving average. Going forward, major losses look unlikely as the Nifty is likely to seek support around 5,140 (50-days DMA) and 5,075 (200-days DMA). Broadly speaking, the Nifty is likely to move in a trading band of 5,050-5,400 in the month of July.
Well, the bulls and bears would have happily gone home at the end of a lackluster day and an eventful week, in which the Indian market emerged largely unscathed following yet another global scare. Every time the bears threatened to unsettle the bulls the key indices managed to bounce back. The same resilience of the Indian market could be put to test next week as market players will have to contend with the RBI rate hike, a mixed US jobs data and the RNRL-Reliance Power merger. Monday being a holiday in the US, world markets might struggle for direction. But, the Indian market will have plenty to play for as it gets ready for the next batch of quarterly earnings.
The sentiment should hold firm notwithstanding the global concerns and the market could head towards the previous intermediate highs. Among the domestic data points to watch out for include the IIP report and monthly inflation numbers, both of which will be released in the week starting July 12. Though a few results might start trickling, next week the real action will kick off with the Infosys earnings on July 13. Overall, India Inc's report card should not hold any major shocks though there is always a chance of some disappointment. The key to watch out for this month is whether the key indices break out of the current range, which is 5200-5350.
Buy IDFC, Canara Bank, Century Textiles for this week.
FOR MONDAY:: Watch NIFTY future for 5220/5200 and 5180 level. Below 5175, EXIT all LONGS.
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