Bulls, back with a Bang! - Angel Broking

The opening session of the week started off with a neutral bias, in-line with quiet global cues. We had mentioned a weekly 'Bearish Engulfing' pattern in our previous report. However, this reversal pattern could not be confirmed as prices breached previous week's low by a margin and immediately bounced back to form a 'Bullish Hammer' pattern later in Monday's session. This bullish formation along with the positive crossover in 'RSI' momentum oscillator turned out to be a nightmare for the bears. The rally which started on Monday eventually crossed the strong resistance zone of '89-day EMA' and '20-day EMA' placed at 19239 / 5820 and 19322 / 5850. Buying was seen across the board and as a result, the markets have closed almost at the highest point of the week. This rally was mainly dominated by Realty, Capital Goods, Banking, Oil & Gas and IT counters. On the other hand, Consumer Durables was the only sector which remained under pressure to close in the negative territory. The Sensex and the Nifty ended the week with a massive rally of 4.04% and 3.95%, respectively.

The '20-day EMA' and the '20-week EMA' are placed at 19348 / 5850 and 19224 / 5826 levels, respectively.

The weekly chart exhibits a 'Bullish Engulfing' pattern but the monthly chart exhibits a 'Bearish Engulfing' pattern.

The daily 'ADX (14)' indicator and the weekly 'Stochastic' momentum oscillator is now signaling a positive crossover.

The level of the weekly 'RSI' momentum oscillator has now bounced back sharply to 58.20 after dropping below the 50 mark.

Indices have closed above the 'Downward Sloping Trend Line', drawn by joining two significant highs of 21109 / 6339 (high of November 05, 2010 weekly candle) and 19137 / 5816 (high of October 05, 2012 weekly candle).

Indices have now finally broken the losing streak after six consecutive red candles. The market movement over the last two weeks can be described as a tug of war between the bulls and the bears. Indices could not sustain below the weekly low and bounced back sharply to nullify the impact of previously mentioned negative technical evidences. This intra-week rally has resulted in formation of a 'Bullish Engulfing' pattern on the weekly chart. As mentioned in our previous report, it can be now concluded that indices have precisely taken a support at the 'Downward Sloping Trend Line' (please refer exhibit 1). This bullish pattern is now supported by the positive crossover in the daily 'ADX (14)' indicator and the weekly 'Stochastic' oscillator. Also, last week we had mentioned that the weekly 'RSI' momentum oscillator has moved below the 50 mark.

Nevertheless, this week it has managed to jump back convincingly to close above the 58 level. This indicates possibility of a further upside move if indices sustain above 19706 / 5953. In this scenario, the markets may rally towards 19768 - 19865 / 5991 - 6025 or even re-test the recent swing high of 20204 / 6112. On the flip side, the '89-day EMA' and the '20-day EMA' would now provide decent support to the markets. These are placed at 19250 / 5830 and 19348 / 5850, respectively. A sustainable move below 19195 / 5795 would once again trigger pessimism in the market.

Source : Equity Bulls

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