Technical Analyst,  A Suresh Kumar Iyer, Asit C Mehta Investment Interrmediates, while commenting on the market said, ``In the last week, the Nifty, as we mentioned in the last weekly outlook, bounced back. The Nifty opened with a positive bias at 3,272.90 and reached a high of 3,648.25 on Tuesday. However, the early gains were wiped off towards the day`s closing. The bearish mood resumed in mid and latter part of the week. The Nifty made a recent new low of 3,046.60 on last Friday closed at 3,074.35, very much near to the weekly low. The Nifty lost 6.28% on a weekly closing basis. The volume is on the higher side. The intra day/week volatility was intensive. Some stock`s range (from low and high) was near to 20% during a day. It is notable that after a prolonged period the Nifty futures started to trade with discount and closed with 2 points discount.``

Daily Charts

In the daily charts, the Nifty was trading and closed well below the short, medium as well as long term averages like 5, 10, 20, 50,100 and 200 day `Simple moving averages` (SMA) and the `Exponential moving averages` (EMA) like 13, 34 and 89 days. In addition, all these averages are looking downwards, which is a bearish sign. The long term averages like 100 and 200 day `SMA` started to move downwards from the flat position, which is the threat to the long term bull trend.

During any uptrend, the 5 and 10 day SMA are acting as a tough resistance. Any close above these two averages is the first indication of the short term rally.

During the fall in the week, the Nifty lost a many of the psychological support levels. However, The Relative Strength Index and both the stochastic oscillator are in highly over sold zone. This will normally lead to a bounce back rally. The Moving Average Convergence Divergence (MACD) is in sell mode. The Average Directional Index DX is in negative mode. The Nifty is below the Parabolic SAR.

The over sold conditions may lead some near term rally after a weak opening.

Weekly Charts

In the weekly charts, the Nifty closed well below the trend line, drawn from the low of May 2004. In the weekly charts, the Nifty closed well below the 5 week and 10 week `SMA`. Both are well below, one of the long term 30 week `SMA` . The RSI is in a sell mode. Both the stochastic are in sell mode. However, the RSI and Stochastic are in highly over sold conditions. The swing trade is in negative mode. The MACD is in sell mode. The ADX is in sell mode. The swing trade system is also in negative mode. The Nifty was trading well below the PSAR.

In the weekly charts, the lower top and lower bottom formation suggests that the Medium term trend is on downside. A `Head and Shoulder pattern` was formed in the weekly charts. The Nifty broke the neckline and closed well below during the last week. This is also a sign for weakness.

However, the highly over sold conditions may lead a medium term bottom formation and followed by a rally.

Monthly Charts

In the monthly charts, the Nifty breached the trend line support (which is drawn from the low of 1,771 during May 2004). Any monthly close above 3,900 will resume the fresh upward momentum. The Nifty re traced near to the 61.8% rise from the low of May 2004. One has to watch whether these levels will act as an support for the long term up move.

Outlook

Near to temporary short and medium term bottom

Based on the above rationale, the Nifty is expected to open with a negative bias. One can expect a bounce back (due to the over sold conditions in the daily as well as weekly charts). This may be a medium term bottom also.
For this week, the Nifty has major support at 2,945-2, 995 (major medium term support), 2,753 and 2,595.The Nifty has resistance at 3,106, 3,167, 3,297, 3,336, 3,363 and 3,450-3,510 (may be end of the short term rally) and 3,790 (strong for medium term).

Strategy
Medium risk appetite traders can add long positions during the early hour of Monday for positional trades keeping the stop loss at 2,945 (on a two day daily closing basis).

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