In the last week’s review I had written that 3972 is a critical level and the index needs to be watched for a close below it.
This week, many people seemed to have been confused by the movement of Nifty. Over the last 6 days, we have been seeing selling followed by buying; this has happened for three times in a row. What does this have to do with futures traders? Apparently, they are not sure whether to go long or short.
Last Friday the index lost 70.55 points. But this Monday, it gained 101 points. On Tuesday and Thursday we saw index losing 134.15 points and 38.20 points respectively. On Wednesday and Friday, the index gained 78.25 and 75.20 points respectively. The total gain for Nifty this week is 82.10 points or 2%.
We had also indicated that worst for the index is possibly over. This appears to be so, even though we may see some more volatility next week.
We will now examine the daily chart of Nifty and see what supporting evidence we have to conclude that the market may have bottomed out.
The possible market ‘bottoms’ have been shown in boxes above. It may be noted that ‘red’ candles have been followed by ‘green’ candles or buying immediately followed selling. This indicates lot of buying support at these levels. In the last six days of trading we have seen alternate selling and buying. So we may conclude that the index is in the process of bottoming out.
The stochastics indicator (middle chart) indicates that it has attained a double bottom. The falling –DI in the lower chart indicates that Nifty is headed towards a possible reversal.
Forecast for next week:
In the weekly chart displayed above, we can see the bullish “harami” candlestick pattern. The real body of the green candle lies within the real body of the red candle and also the shadows of green candle are within the shadows of the red candle. This gives medium reliability for the pattern. Ideally, the entire greencandle within the real body of the red candle would be highly reliable. This harami pattern, when followed by a green candle and higher close either next week or next two weeks would confirm the reversal pattern. This means that the index needs to close above 4325 in the next two weeks.
Since the index has still not closed yet below 50% retracement level in the weekly chart, there is every possibility that it may close above 4325 either next week or the week after next.
Futures & Options Market:
The following chart shows the status of underlying open interest in the August futures contracts for Nifty.
“Open interest” means the number of total contracts which have not been exercised (outstanding in the market). It can be seen from the above chart that open interest is declining while prices are also declining. This implies that the long positions are being liquidated. In other words, the bull market is still intact. Since open interest is not increasing no fresh short positions are being added to the market.
Advance/Decline Ratio:
| Date | Adv. | Dec. | Unch. |
| 20-Aug | 857 | 263 | 14 |
| 21- Aug | 82 | 1046 | 8 |
| 22-Aug | 490 | 634 | 15 |
| 23-Aug | 349 | 759 | 31 |
| 24-Aug | 778 | 323 | 30 |
Top Gainers / Losers among Index stocks:
| Scrip | % Gain | Scrip | % Loss |
| BHEL | 12.37 | HCLTECH | 7.98 |
| STER | 11.45 | CIPLA | 7.55 |
| BHARTIARTL | 8.61 | PNB | 6.37 |
| AMBUJACEM | 7.11 | SUNPHARMA | 4.03 |
| TATASTEEL | 7.07 | WIPRO | 3.58 |
Top Gainers / Losers in overall market:
| Scrip | % Gain | Scrip | % Loss |
| SELMCL | 51.05 | ATLANTA | 17.57 |
| CHAMBALFERT | 25.40 | OMNITECH | 17.03 |
| PATNI | 22.37 | IILTD | 16.26 |
| PAVCI | 15.77 | WALCHANNAG | 14.85 |
| EUROCERA | 15.36 | TFL | 14.77 |
SEL Manufacturing Company (SELMCL) is a new issue.