Nifty Weekly Review as on 18 Feb 2008

My last week’s assessment on Nifty was exactly right and market made a low of 4803.60 and after trading around this support level for three days the market turned around. (The short term scenario is very much uncertain. What I feel that there is a higher probability of a relief rally in US and that will give a relief to Indian as well as global markets – From last weeks review) Nifty moved up by almost 10% form the low’s and it closed up by almost 4% form previous week’s closing. This up move in our market was adequately supported by an up move in Dow Jones, which also showed some strength (although not as vigorous as our market) and it closed up by 2% form previous week.

I am pasting the Monthly chart of Nifty here. We can clearly observe that Nifty is taking support at lower band of the channel which lies near by 4800 while 5500 is acting as a stiff resistance. If we carefully observe candlestick pattern, we can observe that the market seems to be forming a Doji pattern this month. So if a Doji pattern if formed (according to me the probability of forming a Doji is very high close to 65-70%) the markets will be range bound for rest of the month I expect the market to close in between 5000 to 5250. So according to me we will still witness very high volatility during the rest of this month. Since this is also a budget month. (Although Budget’s are now merely a shadow of their past and the influence on economy has reduced significantly form what it used to be during controlled regime). Its importance can not be underestimated for a mixed economy like India. Therefore unexpected moves on Charts always remain highly probable.