Mktviews Weekly Nifty Analysis (08/08/2011-12/08/2011)

Fears of acceleration of Growth Slowdown in US economy coupled with fresh tremors of Eurozone Debt crisis triggered bloodbath in Global Mkts. Downgrade of US economy by 2 major credit rating agencies (Dagong's of China & S&P of US) in less than 48 hours is a major concern for world economy. 

We have been advising for the past 2 months that Markets are clearly in negative zone & are facing selling pressure on all rises & any rally should be used to exit long positions and fresh short positions should be added at higher levels. Markets exactly behaved as per our predictions and Nifty continues to trade below its 200 DMA for more than 2 Months. With Rising Inflation & High Interest rates very certain to dampen corporate profitability, We can expect some more selling in the comming weeks admist occasional bouts of small short-coverering pullback rallies. 

Currently, After a sharp cut of 596 pts in Nifty Fut (5710 to 5115) in last 2 weeks, Expect a max pullback upto 5340 which is 38.2% Fib Retracement of the current fall but use it to reduce long positions as Selling pressure would be witnessed on all rises. 

Nifty Fut made a high of 6210 in Jan 2011 & made a low of 5175 in Feb 2011. From 5175, it bounced back to 5945 in April 2011. It has created a parallel channel & lower end of the channel could terminate around 4910 area. (6210-5175 = 1035 points & now 5945-1035 = 4910). 

Now, again for the markets to be start a new bull rally, it has to touch the lower end of the channel from 5945 to 4910 which incidentally is very similiar to channel pattern created during Apr 2011 to July 2011 where it made a high of 5945 in April 2011 & again a bottom around 5175 level in June 2011. From 5175, it again bounced back to 5710 area. (5945-5175 = 770 points, Now 5710-770 = 4940). 

Hence We could conclude that a new rally could resume only after creating a new bottom around 4910-4940. A deeper correction could be possible if Nifty would breach 4905-4920 area.

Going Forward,
Nifty Fut faces crucial Trendline resistance @ 5345-5362 levels crossing & closing abv which further Momentum would lead to 5484 & 5569.
But, If fails to cross & sustain abv 5362, Will be in a trading range 5058-5362.
Strong support lies @ 5060-5065.
If breaks & closes below 5058, it may touch 5963 & 4875.

Regards,
Team Market View Investments.
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