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Week Review January, 12, 2013

The Bull is still Struggling  

The week began on a quiet note in-line with mixed global cues. As the week progressed, we witnessed a series of resembling trading sessions, where the bellwether indices, the Sensex and the Nifty, opened higher for the day and then corrected lower during the second half of the session. Similarly on Friday too, indices opened higher on the back of stellar Q3 earnings from IT giant Infosys. A whopping intraday rally in excess of 15% in Infosys somehow defended our benchmark indices while all other index heavyweights experienced sharp cuts. During the week, the indices struggled to sustain above the resistance level of  19798 / 6021  (Sensex / Nifty). Further, as mentioned in our previous daily reports, closing below 19679 / 5981 has confirmed a 'Hanging Man' as well as the 'Engulfing Bearish' patterns. As expected, indices then gradually slipped towards the immediate support levels of 19624 - 19509 / 5960 - 5935. During the week, the Capital Goods, Consumer Durables, FMCG and Metal counters experienced a heavy profit booking; whereas the IT and Teck sectors posted massive intraweek gains. The Sensex and the Nifty ended the week with a loss of 0.61% and 1.08%, respectively.

Future Outlook
Last week's strong closing is followed by a muted week. Despite positive opening on most of the trading sessions, indices traded with negative bias and corrected gradually during the week. At present, we are observing that indices are now approaching '20-Day EMA', which is considered as a decent support level. However, negative placement of 'RSI-Smoothened' and '3 & 8 EMA' on the daily chart amidst a corrective chart structure in many index heavyweights indicates at a possibility of a near term correction in the market. In addition, 'Negative Divergence' in the daily 'RSI' momentum oscillator is still intact. Hence, in the coming week, if our benchmark indices manage to sustain below the '20-day EMA', then we can expect a corrective move towards their next support levels of  5842. Conversely, a sustainable move beyond this week's high of 19857 / 6042 would certainly nullify all possibilities of a short term correction. In this scenario, indices may resume to their larger degree bullish trend and we may then expect an extended up move towards 19950 - 20100 / 6070 - 6125. However, we reiterate that traders should consider reducing long positions and partial profit booking in individual large cap counters near to the 19950 - 20100 / 6070 - 6125 mark on the benchmark indices.



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