Expert Speak 2nd July ;2011

200DMA shall continue to inculcate the stiff resistance to Nifty

The Indian equity market continued the rally, stretching the recovery to the second consecutive week. Even though the last day's selling can be regarded only as a profit booking ahead of the weekend, the pattern the general market indices – NSE Nifty and BSE Sensex – formed is quite interesting. This, along with the fact that the technical momentum indicators are trading in the overbought region, will make the 100-days Moving Average a critical support for the market direction in the week ahead.

The MACD is continuing in the positive side with better momentum. However, the RSI and Stochastic Oscillator are in the overbought zone, which can be risky for the continuation of the current bull-run, before (atleast) a small correction. The pattern of the sell-off which occurred in the last day is also adding to the concerns.

Considering all these facts, the 100-days moving average which is trading at 5570 for NSE Nifty, will become critical for the market direction – on a closing basis. The trend is expected to remain intact as long as the index manages to close above this. However a failure can possibly stretch the downside further with first support at 5495, followed by 5420.

However, if the index manages to hold the critical support mentioned above, the first and major resistance for the week ahead is seem at 5720 – any short-term upside will pan-out only after a close above this level. Even then, a sustained upside can be an extreme expectation for the market.