Thursday, September 25, 2008

Stochastics Too Gives Sell Signal

After flat American and Asian markets, nothing much was expected from the Indian markets too. And, as expected, the opening was nothing to talk about. Today was F&O expiry day and on F&O expiry days markets generally remain volatile. That was not the case this expiry. The Nifty, after a week opening, started going down and it wasn’t until 1:45pm that the fall stopped. But by that time, the NSE index had already shed about 80 points. A little bit of recovery came about post 2 but as the market neared closing, the movement too stopped and the Nifty slipped into a 10-15 points range after that. Today, Thursday, was a good day for the European markets and so does it look for the American markets. The London FTSE and the German DAX closed with gains of 2% while the French CAC was up 3%. The Dow Jones, at the time of writing, was trading with gains of almost 3%. Crude had increased to $108.65 intra day but had come back to $106.90.

Nifty Daily Chart - Moving Averages Provide Resistance, Stochastocs Gives Sell

Attached above is the daily chart of Nifty along with two moving averages and a stochastics oscillator. The chart has been zoomed in to show only 3 months data so that we get a closer look at the moving averages. The thick green line at the bottom is the support that the Nifty respected twice at 3800. Among the moving averages, the green one is the 21 day moving average while the brown one is the 10 day moving average. Both moving averages are important and provide good signals in their respective time frames. Here, as discussed in one of my previous newsletters, the prices had come below the 21 day exponential moving average and had given a sell signal on 11th Sep 2008. The 10 day moving average also gives similar signals, except that it gives a quicker response than a 21 day moving average. Here, the prices are below both the moving averages and both of them should provide resistance to the Nifty. The 10 day moving average provides resistance near 4170 while 4229 happens to be the level for the 21 day moving average. As regards stochastics, the 5,3 day stochastics slowed to 3 days has given us a sell signal yesterday.

With the American and European markets good today, chances are that we might open strong too. In case we don’t, or if we do and then come down then support comes in near the green line (the thinner one) near 4073-4075. A move below this level should, rather could, bring us to levels of 4000, 3950 and possibly 3800. With the new F&O series taking over tomorrow, let us see how it makes the Nifty behave.

Please do
subscribe to my posts, so that all posts are delivered free to your inbox and you don't miss any useful analysis of the markets in the future.

Happy Investing!!!