Tuesday, January 17, 2012

EOD Analysis for 17th January 2012 and Outlook for 18th January 2012

High weightage day again on expected lines but direction certainly foxing bears [incl me]! On the back of positive cues from Asia, Nifty opened with a gap-up and sustained itself above 4944 levels for a major portion of the day. Whilst the opening session saw an OI in Nifty futures at 26 odd million, by the Europe open session, it was clocking 28.5 odd million all the way till the end- exactly what the bulls needed for the day. Moreover, sectoral stocks also extended their gains with just CNXIT being laclustre [Auto, FMCG, Capital Goods, Pharma, Real Estate, Metals all extended their gains and not to forget my favorite barometer, Banknifty though this one is showing signs of being a bit tired] That being said, the market breadth at least on index counters is very positive at the moment so the dependence on Banknifty may be limited for 2-3 trading sessions. VIX below 23 and it seems too sweet to be true [maybe my personal bias]

Just as the close above 4840 was crucial earlier [had potential to yield upto 4984 and we saw a high of 4971 today on spot] the close above 4944 is again very significant for bulls and perhaps, more pain for bears.
4944 is a very critical angular resistance and hence, some more upside maybe left in Nifty [if bulls get lucky, they may see another 150 odd points from here challenging the 5032-5092 resistance bands!]

Are markets out of the woods - an emphatic NO! It is the news of potential QE in different formats from China, US and possibly Europe that is keeping markets in the green [read hope]. One round of profit booking and correction is due; the longer markets take to correct and backtest the lows, the sharper will be the subsequent correction.

For downside, weakness only after a close below 4690 that will bring in a lot of panic and fear. There are now 3 gap-ups pending to be filled and that started from 10th Jan '11. These gaps are bound to be filled in a time frame of 3 to 5 weeks so bulls can't take it easy.

For Next 2-3 trading sessions

Critical Support Levels: 4800-4840-4880-4911 [even in case of steep corrections from here, the 4690-4728 band IMHO will provide good support for a bounce back]

Critical Resistances: 4994-5032-5092

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