http://www.thehindubusinessline.com/iw/2010/06/20/stories/2010062050600700.htm
*Index Outlook: Bear-squeeze can extend the rally * ** ** ** ** ** ** ** ** ** *Sensex (17,570.8)* The Sensex recorded a strong 500-points gain last week. But this move went almost unnoticed since market participants were busy tracking the two Reliance factions and speculating over their next move. The Ambani charisma was on display yet again as investors vied with each other to hitch their wagons behind Reliance stocks. Trading activity picked up on our bourses as fears of stock prices caving in abated. Volumes in both cash and derivative segment were very high, especially in the later half of the week. Expiry of the June derivative contracts will preoccupy traders next week since open interest is at all-time high at Rs 1,56,000 crore. But the fact that put options form the greatest chunk in this at Rs 54,000 crore denotes that a ‘bear-squeeze' could take place sending the Sensex to a new 52-week high. The Sensex moved above the key resistance at 17,300 on Monday and then went on to build on the gains over the ensuing four sessions. But the move in the later part of the week lacked momentum and this fact is implied by the dip in 10-day rate of change oscillator. Weekly rate of change oscillator and 14-day relative strength index however continue in the middle-zone implying a neutral bias over the medium-term. The Sensex also moved well above its long-term and medium term moving averages last week signalling that it is in a relatively safer position. As indicated in this column last week, close above 17,300 denotes that the index can take another shy at its 2010 peak of 18,047. Last week's move has turned the medium term trend in the index neutral again. The prospect of a leg down towards 15,500 in the near future appears remote. The sideways range between 15,500 and 18,000 that is shackling the Sensex since last September could continue to do so for some more time. The upper boundary needs to be moved slightly higher to 18,500 and a close above this level is needed to signal a fresh leg of the rally from March 2009 depths. Such prolonged sideways moves are of course a bane for technical analysts since the formations in such moves gets very complex and are difficult to decipher until the move ends. The short-term trend in the Sensex is currently up. If we extrapolate the move from 15,960 low, the index has the targets of 17,751, 18,205 and 18,406. In other words, the index has resistance around Friday's peak of 17,721 and the presence of the 18,047 peak in the vicinity could cause volatility in the week ahead. But the trend is currently up and short-term investors can buy in declines as long the Sensex trades above 17,278. Subsequent supports are 17,140 and 17,003. *Nifty (5,262.6)* The Nifty made an emphatic move above 5,190 last Monday and then continued to edge higher to record the intra-week peak of 5,302 on Friday. Third wave of the move that started at 4,786 has the targets of 5,329, 5,465 and then 5,553. Since the Nifty is close to 5,329, fresh longs are advised only on a strong move above this level. Previous peak at 5,400 will be the next destination once the index moves past 5,329. The short-term trend continues to be positive and traders can hold their long positions as long as the index trades above 5,174. Close below this level will drag it lower to 5,117 or 5,095. The short-term trend will turn negative only on a close below 5,095. The medium-term view turned neutral after last week's rally. Investors can now look forward to the index making a new 2010 high. Caveat – it should stay above 5,174. *Global Cues* Equities eked out small gains last week helping major benchmarks to move higher. Commodity prices too perked up and the CRB index closed 3 per cent higher for the week. Most Asian benchmarks too closed with strong gains, the exception being Shanghai Composite Index that is wavering close to 2010 lows. The optimistic mood among investors is reflected in the CBOE volatility index declining below the key level of 28. If this index remains below 28, it will mean that the summer correction is at an end and indices are heading towards a new yearly high once again. The Dow moved above the key short-term resistance at 10,300 to close at 10,450. As indicated last week, key short-term resistance level for this index is 10,700. A close above this level is needed to take Dow towards a new 2010 peak. — Lokeshwarri S.K. -- You received this message because you are subscribed to the Google Groups ""GLOBAL SPECULATORS"" group. To post to this group, send email to [email protected]. To unsubscribe from this group, send email to [email protected]. For more options, visit this group at http://groups.google.com/group/globalspeculators?hl=en.
