Review of the Previous day: The Nifty rose marginally on Thursday (September 02, 2010) a net 14.30 points (0.26%) and closed at the 5486 point level. The market opened up with a gap to register the days high at the 5514 points level at 9.01 a.m. It then declined and turned into a range bound movement until closing at the day. The Nifty remained above its previous close throughout the day and moved in a range of 42 points. Sentiment seemed bullish and amongst the 50 Nifty stocks, 25 were gainers, while 25 were losers. Buying was witnessed in metal, FMCG, capital goods, and banking stocks, while selling was witnessed in IT and oil & gas stocks.

Technical Analysis:

Volume (Qty shares) increased 25.63%. This change is substantial and indicates a wide participation by investors.

Market Breadth: Overall Market Breadth on the NSE was positive. Amongst all the traded stocks, 886 were gainers, 521 were losers and 30 remained unchanged.

Slow Stochastic Indicator: The Slow Stochastic Oscillator is in the neutral zone. The Slow K line in the Stochastic Oscillator is above the slow D line (positive if it continues).

RSI Indicator: The RSI is above the 40 level and is now rising (positive if it continues).

MACD Indicator: The MACD is above zero and is rising (positive if it continues). It is below its 9-day Average (negative).

ADX Indicator & DI Lines: The +DI line is above the -DI line and both lines are diverging (positive if it continues). The ADX is falling while the Market Index is rising, which indicates that the present up trend is decreasing in strength.

Moving Averages (Trend Indicators)

The index

Is above its 5-day average (at 5436) Positive.

Is above its 15-day average (at 5467) Positive

Is above its 25-day average (at 5455) Positive

Is above its 200-day average (at 5180) Positive.

Overall Market Strength/Weakness: The indicators and oscillators discussed here are indicating a strong market with a positive bias.

Support Levels: For short-term traders the immediate main support is at 4394 marked as S1 (blue line below the Index).

Resistance Levels: The immediate main resistance is at 5580 marked as R1 (red line above the Index).

Pivot Point Analysis: For intra-day traders the support and resistance levels are calculated according to the pivot point theory and are:

Pivot point = 5491 (This is the level where the trend is likely to change during intra-day).
Support (1) = 5467.
Support (2) = 5449.
Resistance (1) = 5509.
Resistance (2) = 5533.

(For support and resistance levels all F&O stocks refer to the Afternoon
Newspaper or Click here)

Outlook for Today: On Japanese candlestick patterns the index has formed a small white body candle with a long upper tail. A long upper tail indicates that the Bulls controlled part of the session but lost control by the end and the Bears made an impressive comeback. As such it indicates that the index was facing some selling pressure at higher levels. This candle also indicates indecisiveness amongst investors. The next candle formation will confirm whether the bias is towards the buy or sell side of the market.
However, the index is above its 5, 15, 25 and 200 days moving averages. Further, the velocity parameters are also positively trended. Both these indicate a positive bias and the possibility of a further up move unfolding.
Investors are advised to hold long positions but with a strict stop loss at the 15-day average at the 5467 point's level.

Work with strict stop losses on all positions.