Sunday, July 27, 2008

Serial Blasts in Bangalore and Ahmedabad

After five days of excellent gains, the Nifty did cool down a little with two days in the red too. After a loss of 43 points on Thursday, it went on to lose 121 points on Friday. Nifty was trading within a narrow range of 30-40 points till about 1 PM. After that for the next hour or so it staged a good recovery and crossed the highs of the day. But at 2PM came the news that Bangalore was rocked with 7 bomb blasts in a space of 75 minutes which left 1 dead and eight injured. Thankfully, they were all low intensity blasts and were blasted more to create panic than to cause destruction. That news sent the market crashing down and the Nifty finally closed with a loss of 121 points at 4312.

Nifty 30 Minutes Chart - Bullish RSI, Support at Trendline

Attached above is the 30 minutes chart of the Nifty with the Relative Strength Index (RSI) at the bottom. Also, on the chart, are an upward sloping trendline and a trend channel between 3800 and 4200. As seen from the chart, the upward sloping trendline is providing support to the prices at 4285. In case this support does not hold, the prices may come further down to the trend channel near 4180-4190. One reason why the prices should find support near the trendline is the RSI. The RSI, as can be seen within the thick brown circle, is finding support near 40. And the RSI finding support near 40 is bullish for the markets, at least in the short term. Three examples of the RSI finding support near 40 have been marked with the green circles and green arrows on this chart itself.

However, things look pretty bad. After 7 blasts in Bangalore on Friday, Ahmedabad was rocked with
16 bomb blasts in a span of 70 minutes leaving 45 dead and 145 injured. Apart from this there was a live bomb found in Bangalore, one in Ahmedabad’s Amraiwadi area and two cars with explosives were found in Surat. The blasts were claimed by a militant outfit calling itself Indian Mujahideen and they even threatened Mukesh Ambani with ‘horrifying memories which you will never forget’. This surely, could bring the markets down. And in case 4285 support is broken, that will then become a resistance. Even if support is found at 4285, there is resistance nearby at the downward sloping trendline near 4340.

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