Is that a breather… before the storm? Update for 19 Feb 09

The markets that seemed to have dive nose down yesterday on the global cues - did not heed to anyone and closed in green. First we attempted to break the range on the upside and then on the down side – but what has happened is that we have for some reason - known to the market and market alone – played in that narrow range. The weak global cues did make the markets open in red but swung wildly led by the reliance. The swing in Sensex was almost 190 points. The reality – that has lost favour since some time now gained and the Banking that was becoming the pet sector lost badly yesterday.

Meanwhile in Asia Nikkei hit the lowest in the last four months on back of the financial stocks and the worries as to how European banks and the credit concerns are hurting the property firms. In any case the in addition to the worsening Japanese economy there is also political uncertainty after the finance minister resigned. The Europe opened flat – went red and then closed flat. FTSE down 0.68%, Dax down 0.28% and CAC down 0.04%. The US also traded and closed indecisive with DOW 0.04% in green,Nasdaq down 0.18% and S&P down 0.1%. Now we once again await the effect of global cues on Asia and on India in particular.

On the candles though the candle was white – it could not pierce the day before’s black candle half way so it really cannot be taken as sign of strength. Only if we do somewhat better than yesterday – and if today’s candle supports this white candle can be taken as a reversal of the down trend we saw last two day. If not then it will indicate a continuation of the downtrend with a breather here. SO finally the much anticipated breakout did not happen on either direction. The up swing takes days to build up and fizzles out in a second and the down move with aggressive candles also die down at the same rate. We are now below the middle of the Bollinger Bands with 5 EMA firmly below the 20 EMA so that part is bearish. The ADX is bearish with the –DI above the +DI. Only thing – that I have been observing and ofcourse putting across here is that whenever we have the markets go down the ADX does not show the same vigour that it shows going up. On MACD we have a tick of negative divergence so it is bearish. RSI is surprisingly looking up and TRIX absolutely flat. We will have to wait for Jaggu to wake up and give us the TRIN. Ofcourse you can reach his blog by clicking his name and he wakes up generally just before the markets open.

As we can see from the chart the markets did not do anything at all yesterday oscillating around the Pivot. The Support was way down around 2733 and the market never got around to test those levels. The yesterday’s struggle with FIIs and DIIs was – FIIs sold 288.45 Cr worth and DIIs bought 102.34Cr worth. See the pulls and pushes? anyway take this with the fact that on Nifty 50 Advances and decline ratio was 1. (25 Advances and 25 Declines) Ah! so that was the reason for us to be flat.

The pivot levels for 19th is as given below: -

R3 2876 as against 2951 yesterday
R2 2842
R1 2809
Pivot 2772 as against 2793 yesterday
S1 2739
S2 2702
S3 2669 as against 2636 yesterday
Projected High Range 2791 to 2826
Projected Low Range 2786 to 2751
Fib Projected High 2825
Fib Projected Low 2716

If under yesterday’s conditions we did not fall then I do expect a positive day today with an attempt to eat into some of the losses we had on the two bad days. Best of luck everyone. I am trying hard to study some options strategy – Hopefully will be able to put across something meaningful within this week for action