Outlook for the Day: 16th July 2010

The previous session was marked by a series of ups and downs in the benchmark index. The S&P Nifty was moving in tandem to the announcement of the quarterly earnings results of companies. The trend of the index continues to be firm for the immediate future. We expect Nifty to be driven by intraday news flow and guidance given by the majors, determining the sectorial view for the market.

The charts show a pause in the current uptrend which could be a pivot for the short term movement in Nifty. The short term moving average (20EMA) is continuing its position above the medium term moving average (50EMA) suggesting that the medium term outlook for index is bullish. However some downside could be witnessed with a possible dip near the 20-EMA.
The ADX indicator for previous session showed decline in its advance and forming a sideways pattern. Any topping out of the indicator would seriously inflict the current uptrend and benchmarks would be susceptible to a correction. The +DI & -DI have both topped and bottomed up in the session suggesting that buyers and sellers have reversed their approach towards the market. This is a periodic signal which has to be confirmed by other indicators as well.

The MACD trend indicator is showing some significant development on the charts. The MACD signal line has topped out and is making new lows in each trading session. The market could see some correction on the cards if the line manages to cross over the Signal line. In the case of bouncing back at the inflection point, the range of the market would widen. The MACD
Histogram has topped out and a penetration into the negative domain would give some room for the Nifty to move to lower levels.

The Slow Stochastic momentum indicator is also showing some decrease in momentum on the buying side. The move below the 80 levels of both the %D & %K line would provide impetus to the sellers and unwinding of long positions is a possible scenario. Keeping in view the possible crossover or bounce back of MACD indicator, we expect Nifty to trade in the range of 5415- 5335.

TEAM SLT