In the last week’s review we discussed about the formation of a bullish engulfing pattern at the top of an uptrend. I had mentioned that the Japanese view it as “double lovers’ suicide’ and profit booking may start. This was exactly the case, as shown in the daily chart below.
While the bullish engulfing pattern formed at support levels in a downtrend is considered as a reversal sign, the one formed at the top of an uptrend is an indication that the market may witness profit booking or a possible downtrend may start.
In the above chart, last Friday, just after the formation of bullish engulfing pattern, a red candle with a long upper shadow appeared. The same was the case this Tuesday, Wednesday and Friday, indicating the sessions encountered sell off. On Monday, the formation of long lower shadow means that the attempt by the bears to push the index down was negated by the bulls. On Thursday Nifty gained 32.10 points, the only session bulls were in total control without much volatility either on upper or lower side.
The following table gives the sessionwise gain/loss for Nifty.
| Date | Points Gained | % Gain / Loss |
| 10-Sep-07 | -1.65 | -0.04 |
| 11-Sep-07 | -10.80 | -0.24 |
| 12-Sep-07 | -0.20 | 0.00 |
| 13-Sep-07 | 32.10 | 0.71 |
| 14-Sep-07 | -10.95 | -0.24 |
Nifty gained 8.50 points (0.19%) for the week. However, it still did not close above 4530, an important resistance level. It just missed it by 1 point on Thursday when it closed at 4529.
The intraday chart of Nifty (Source: NSE web site) shows the profit booking that started after the middle of the trading session. It also tells us about the inability of the bulls to maintain the index at higher levels right through the day.
However, there are no reversal signs yet in both weekly and monthly charts of Nifty and we maintain our bullish view of medium and long term.
In the Nifty futures contract though, there is a bullish engulfing pattern at the top of the uptrend; but the volatility could not be found. Also, no reversal sign can be seen in this chart too.
Forecast for next week:
Last week I had mentioned that we got a clue but no confirmation. Now that the clue has been proved correct, we should expect a reversal signal and correction this week. This correction, when happens, will be good for the index. It is worth mentioning here that, after the last month’s correction, Nifty has retraced about 90% from its low at 4002.
Is there any possibility that index may breakout on the upper side without getting corrected? Though one may not rule out this straightaway, the chances are negligible, as seen from the volatility and profit booking at higher levels.
Advance / Decline Ratio:
| Date | Adv. | Dec. | Unch. |
| 10-Sep-07 | 612 | 515 | 26 |
| 11-Sep-07 | 492 | 630 | 29 |
| 12-Sep-07 | 589 | 537 | 27 |
| 13-Sep-07 | 653 | 474 | 24 |
| 14-Sep-07 | 314 | 824 | 15 |
Top Gainers / Losers among Index stocks:
| Scrip | % Gain | Scrip | % Loss |
| SUZLON | 7.01 | HCLTECH | 9.71 |
| RPL | 6.47 | WIPRO | 5.85 |
| STER | 5.40 | TCS | 5.00 |
| DABUR | 5.06 | CIPLA | 4.71 |
| IPCL | 4.78 | SATYAMCOMP | 4.24 |
Top Gainers / Losers in overall market:
| Scrip | % Gain | Scrip | % Loss |
| TIDEWATER | 55.90 | DCHL | 19.87 |
| MARKSANS | 40.13 | DECOLIGHT | 16.71 |
| NAUKRI | 38.48 | SELMCL | 15.05 |
| AFTEK | 34.94 | ROLTA | 13.73 |
| NOVAPETRO | 33.24 | SUBEX | 12.92 |