Sunday, April 10, 2011

Markets Next Week

The markets were flat this week, but there were a number of interesting happenings which could be a precursor of things to come. The coming week should be decisive in telling us whether the Up move is done with or if we can go higher.

1. Gold closed at an all time high of 1474 dollars. The rupee has strengthened to almost 44 to a dollar and hence this is not reflected in rupee terms price of gold. Gold now has given a breakout from its previous top of 1434 dollars and first target can come at around 1550 dollars.Around the 1500-1550 dollar range comes multi - year resistance and once this gets taken gold can zoom up.

2. Crude is at 126 dollars to a barrel (Brent Crude). Petrol under-recovery of 4 rupees and Diesel under-recovery of 17 rupees to a litre. The Fiscal Deficit goes for a toss and the oil refining companies continue to bleed.

3. The Markets have formed a Gravestone Doji on the Weekly charts and which is usually a reversal sign.we need to see for the follow up in the coming week.

4.Several short term technical indicators have given a Sell signal and key supports are 5711, 5640 and 5608.

5. If we take Wave 1 down as from 6339 to 5177, this could have been Wave 2 up from 5177 to 5944. We would need to see if the Third Wave down has begun and it could have targets of 4800 or 4300 on the Nifty.

6. The Bollinger Bands have been touched on the upper end and a reversal is under way. The Stochs have given a sell and MACD also has turned down. We ow have 2 possibilities. A correction to the last up move from 5348 to 5944 or a fresh down move. Reversal from 5600-5700 could mean that the up move has not yet ended.

7. The Trend line joining the previous 2 tops provided good resistance and is now at approx 5900. This could be a good level to decide whether to take fresh longs.

8.. The Full Year results will start trickling in the next week. The Results are usually factored in unless there are some great upgrades.

Strategy Ahead: Its a truncated week with 2 Holidays. Long above 5944 and short below 5830 with taking the 5 day EMA as a stop loss.

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