Outlook for the Day: 20th July 2010

Taking cues from the overseas markets Nifty in the previous trading session opened with a gap down near the strong support of the 5365 level. The buyers were active at every lower levels and the benchmark got support on each correction. Nifty was insulated from the global cues for the latter half of the session and maintained the 5385 mark for most of the time. At the closing bell some profit was taken off the table with the benchmark closing marginally in red.
The technicals on the charts are suggesting an inflection point on the cards. The indicators are providing cues of a highly volatile session in the shorter time frame. The moving averages both short term moving average (20-EMA) and the long term moving average (50-EMA) are continuing with their directions. The current uptrend would be coming to a halt when both the averages tops out, which is a possible case if the benchmark goes for a severe correction. A strong support could be expected at these levels in the case of a severe correction.
The ADX is giving a rounding pattern on the charts which indicates a slower correction in the benchmark. The +DI and –DI have already topped and bottomed up respectively. This indicates that the buyers are not active at higher levels and sellers are building positions gradually. The crossover of these two would be an important event to watch for.
The MACD indicator as suggested in our previous newsletters has marginally closed in the negative region after the crossover. The MACD Histogram is also trading with making lower tops with each trading session. The subsequent move into the negative domain would be a signal towards weakness in the benchmarks. The bounce back from the zero levels would again bring buying trend in the Nifty which would be a strong buy signal for the markets not to be ignored.
The Slow Stochastic momentum indicator is also trading towards the 50 levels. The indicator would be suggesting a sideways movement in the index for the time to come if it sustains near those level. However any movement below these lines would point towards a momentum on the short side of the trade. We expect Nifty to trade in the range of 5335-5395 in today’s session.

TEAM SLT