Couple of weeks ago the Nifty lost by 3.70%. Last week, Nifty had gained 3.57% whereas this week it has lost 3.62%. This has lead Nifty to a rangebound weekly movement. A hammer was formed four weeks ago. It was followed by a near hammer; similar pattern appeared last week as well. It can be observed from the weekly chart that during the last 4 weeks the Nifty has moved within the range of the week ended January 25.
Hammer which appears at the end of a downtrend could be a sign of reversal if supported by other indicators. In the combined charts shown above, 3 “hammers” could be seen on the weekly chart. While no strong reversal sign has appeared yet, the rangebound activity suggests that market could be heading towards a short term bottom.
In the daily chart, we can see the higher bottoms being formed. A bullish harami candlestick pattern was formed on Thursday but could not be confirmed. 5040 should act as a strong support area for the Nifty based on the current trendline. It has closed below 38.20% retracement level of 5152 and the 61.8% retracement works out to 5020. One may expect the index to reverse between the range of 5020 to 5040. Considering other scenarios, if the above levels could not be held, the recent low at 4804 and 4449 are likely to act as supports.
45.5% of the stocks advanced during the week while 53% declined and 1.5% remained unchanged. Some notable gainers were GTC Industries, OCL India, Hexaware, Bank of Rajasthan and Gujarat NRE coke while JP Associates, Indiabulls Real estate, HDFC, ABB and Lanco InfraTech were amongst losers.