Markets grope for direction in coming week – ET

Posted on May 14, 2011 by

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Kunal Saraogi, CEO, Equityrush

Markets turned out to be quite volatile in the week that just ended as they contended with surprisingly strong IIP numbers and assembly elections results that largely fell in line with expectations.

Next week will have fewer cues and may well see more subdued price action. One look at the Nifty’s charts indicate that the benchmark index is hemmed between the levels of 5250 and 5700 and is unlikely to break out of this range in the next few trading sessions.

Soon enough, markets will start responding to F&O expiry pressures that is due on 26th May. Traders continue to keep away from the markets given the heightened volatility and lack of clear direction. Continued FII selling has added to the woes of an already listless market.

What might act as a trigger for the markets is clear and decisive breakout above the 5600 levels which have proved to be a stiff resistance in the last few sessions.

Traders should look to buy into the markets should the Nifty manage to take out this critical level and sustain above it for a while. The target then for the Nifty will be close to 5730 which is the most significant overhead resistance level.

Longer term charts for the Nifty indicate that the index has had a substantial long build up over the last couple of weeks and may well be headed higher in the medium term.

Although markets have been trading below their 200 DMA for some time now, there is a strong probability that the Nifty may rise to meet the DMA line around 5750 over the next few sessions.

Sectors that might help the Nifty get there could be pharma, banking and fertilizers which have seen continued investor interest and look particularly strong on technical indicators and the only spot of bother remains IT which continues to look weak and may shed some weight going forward.

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Posted in: India