In the last week’s review, I had mentioned:
“The engulfing pattern seen at the top of the trend on 31.05.07 is not a helathy sign. It was further confirmed by the sell off next day, with a very long upper shadow. We can anticipate a correction now upto 4039 or 3902.”
The nifty closed at 4145, losing 152.05 points on weekly basis or about 3.54%.
As such, there were no reversal signs last week but we got a confirmation of the short term trend reversal now. The nifty is bearish now and we can expect the nifty to hit its support at 3902.
Watch the bearish engulfing pattern followed by a red candle and lower close (also known as three outside down pattern), a highly reliable 3 candlestick pattern in the daily chart of nifty shown below.
The nifty has already broken and closed below its first support at 4218. The upward movment from 3617 to 4218 had very minor corrective declines; if we consider the next high it would be 4039. After that it is 3902. These two levels should act as supports.
Going by the theory of “an ideal bull market” usually 50% retracement should be a good support. This level is 3990. So, anywhere between 3990 and 4039 nifty may be able to bounce back.
Remember that these levels are only indicative and actual levels may significantly vary from the numbers given above.
In the weekly chart also, one may find the “bearish engulfing pattern” formation as shown below. However we need a confirmation on a weekly closing basis to decide on the medium term trend reversal.
Status of index stocks in daily/weekly charts:
The following table illustrates the movement of index stocks in daily and weekly charts (bullish/bearish/sideways)
| Scrip | Status (Daily) | Status (Weekly) | Weekly Gain % | Remarks |
| ABB | Bearish | Bullish | (3.57) | "Dark cloud cover pattern" in weekly chart needs confirmation next week |
| ACC | Bearish | Bearish | (10.00) |
|
| BAJAJAUTO | Bearish | Bearish | (5.59) |
|
| BHARTIARTL | Bearish | Bullish | (3.07) |
|
| BHEL | Sideways | Bullish | (7.60) | "Bearish engulfing pattern" in weekly chart needs confirmation next week |
| BPCL | Bearish | Bearish | (8.23) |
|
| CIPLA | Sideways | Bearish | (5.74) |
|
| DABUR | Sideways | Sideways | 0.82 |
|
| DRREDDY | Bearish | Bearish | (2.71) |
|
| GAIL | Sideways | Bullish | (7.32) | "Bearish engulfing pattern" in weekly chart needs confirmation next week |
| GLAXO | Bullish | Bullish | (1.18) |
|
| Scrip | Status (Daily) | Status (Weekly) | Weekly Gain % | Remarks |
| GRASIM | Bearish | Bearish | (5.14) |
|
| GUJAMBCEM | Bearish | Bearish | (4.75) |
|
| HCLTECH | Sideways | Bullish | 1.19 |
|
| HDFC | Sideways | Bullish | (6.11) | "Bearish engulfing pattern" in weekly chart needs confirmation next week |
| HDFCBANK | Sideways | Bullish | (5.42) | "Bearish engulfing pattern" in weekly chart needs confirmation next week |
| HEROHONDA | Sideways | Bearish | (4.47) | "Bearish harami pattern" in weekly chart needs confirmation next week |
| HINDALC0 | Bullish | Sideways | 11.95 |
|
| HINDLEVER | Bearish | Bearish | (6.25) |
|
| HINDPETRO | Bearish | Bearish | (11.73) |
|
| ICICIBANK | Sideways | Sideways | (2.90) |
|
| INFOSYSTCH | Bearish | Bearish | 0.63 |
|
| IPCL | Sideways | Bullish | (4.16) | "Bearish engulfing pattern" in weekly chart needs confirmation next week |
| ITC | Bearish | Bearish | (6.49) |
|
| LT | Sideways | Bullish | (5.77) |
|
| M&M | Sideways | Bearish | (5.82) |
|
| MARUTI | Bearish | Bearish | (9.08) |
|
| MTNL | Sideways | Sideways | (4.71) | "Dark cloud cover pattern" in weekly chart needs confirmation next week |
| NATIONALUM | Sideways | Bullish | 2.40 |
|
| ONGC | Bearish | Sideways | (5.11) |
|
| PNB | Bearish | Sideways | (6.92) | "Bearish engulfing pattern" in weekly chart needs confirmation next week |
| RANBAXY | Bearish | Sideways | (5.62) | "Bearish engulfing pattern" in weekly chart needs confirmation next week |
| RCOM | Bullish | Bullish | 1.61 |
|
| REL | Sideways | Sideways | (3.93) |
|
| RELIANCE | Sideways | Bullish | (5.38) | "Bearish engulfing pattern" in weekly chart needs confirmation next week |
| RPL | Sideways | Bullish | (1.46) | Near resistance zone |
| SAIL | Bearish | Sideways | (10.06) |
|
| SATYAMCOMP | Bullish | Bullish | 3.16 |
|
| SBIN | Bearish | Bullish | (1.62) | "Bearish three outside down" pattern in daily chart |
| SIEMENS | Sideways | Bullish | (1.59) | "Dark cloud cover pattern" in weekly chart needs confirmation next week |
| STER | Sideways | Sideways | (2.59) |
|
| SUNPHARMA | Sideways | Bullish | (3.33) | "Bearish engulfing pattern" in weekly chart needs confirmation next week |
| SUZLON | Bullish | Bullish | 4.14 |
|
| TATAMOTORS | Bearish | Bearish | (12.80) |
|
| TATAPOWER | Sideways | Bearish | (1.97) | "Dark cloud cover pattern" in weekly chart confirmed this week |
| TATASTEEL | Sideways | Bullish | (7.79) |
|
| TCS | Sideways | Sideways | 0.11 |
|
| VSNL | Sideways | Bearish | (0.86) | "Dark cloud cover pattern" in weekly chart confirmed this week |
| WIPRO | Sideways | Bearish | 0.62 |
|
| ZEEL | Bearish | Sideways | (7.06) |
|
From the above table, we can see clear trend in both daily and weekly charts in few stocks whereas in others some indecision exists. Dabur, HCL Tech, Hindalco, Infosys, Nationalum, RCOM, Satyamcomp, Suzlon, TCS and Wipro have gained this week where as the rest are losers. Glaxo, RCOM, Satyamcomp and Sulzon are bullish and ACC, BAJAJAUTO, BPCL, DRREDDY, GRASIM, GUJAMBCEM, HINDLEVER, HINDPETRO, INFOSYSTCH, ITC, MARUTI and TATAMOTORS are bearish. Interesting to note the bearish candlestick pattern formations in the weekly chart – many need confirmation next week! This makes an interesting week ahead.
Advance Decline Ratio:
| Date | Traded | Advanced | % Adv | Declined | % Dec | Unchanged | % Unch |
| 04/06/07 | 1101 | 404 | 36.69 | 665 | 60.4 | 32 | 2.91 |
| 05/06/07 | 1103 | 534 | 48.41 | 527 | 47.78 | 42 | 3.81 |
| 06/06/07 | 1105 | 228 | 20.63 | 852 | 77.1 | 25 | 2.26 |
| 07/06/07 | 1103 | 388 | 35.18 | 672 | 60.92 | 43 | 3.9 |
| 08/06/07 | 1101 | 350 | 31.79 | 723 | 65.67 | 28 | 2.54 |
| Totals | 5513 | 1904 | 34.54 | 3439 | 62.38 | 170 | 3.08 |
This means that the bears have dominated during the week.
Following table gives the list of top 5 gainers and losers among cash stocks:
| Scrip | % Gain | Scrip | % Loss |
| BLBLIMITED | 41.31 | VAIBHAVGEM | 16.60 |
| PARAL | 32.84 | TVSELECT | 15.94 |
| KERNEX | 29.94 | SGL | 16.38 |
| TIMESGTY | 28.22 | IILTD | 15.67 |
| RUBYMILLS | 27.64 | HILTON | 16.17 |
Conclusion:
As anticipated last week, a corrective decline happened in the market. We need to wait for further confirmation this week. Let us expect that the index and stocks bounce back this week!!