Friday, October 3, 2008

Short Term Bullishness, Intermediate Term Bearishness

After the US bailout package was defeated in the House of Representatives on Sep 29 228-205, the Senate approved the same last night with a thumping majority 74-25, says Bloomberg. The package would be sent to the ‘House’ again Friday afternoon for reconsideration. Many republicans who voted against the package last time may reconsider and switch their votes in favour of the bailout package. Despite the Senate’s approval US stocks remain down today with the Dow Jones trading with a loss of 330 points. European markets also remained weak losing between 2 and 3%. Gold has lost a few dollars while crude has slipped to $94 a barrel. The only thing that remains strong in this kind of a market is the dollar, and who can forget our very own Nifty.

Nifty Daily Chart - Long Lower Shadows and Stochastics Bullish in Short Term

Seen above is the daily chart of Nifty. Just like it was seen a few days back, the Nifty again displayed long lower shadows on its candles, which happens to be a short term bullish sign. The 5,3 stochastics oscillator, too, slowed down by 3 days has given a buy signal. The Nifty seems all set for a short rise from here. Possible resistance levels for this short spurt seem to be near the two green trendlines drawn. For tomorrow, one of the resistances lies near 4043 and the other lies at 4075. The Nifty, on Wednesday, after touching a high of 4000.50 dropped and finally closed at 3950.75.

Well, the Nifty is displaying short term bullishness, as the charts suggests, but also, as is evident from the charts, we still happen to be in an intermediate term downtrend with the Nifty clearly showing a pattern of lower highs and lower lows since early August. Now, which of these trends will prevail in the short term is difficult to say. It could be a downtrend since there is bearishness all across the world. But that has been there since quite a few days now, yet our Nifty is displaying strength. The Nifty may decide to go up first, touch one of the trendlines, and then fall back. And finally, the Nifty may even decide to slip from where we currently are. What will be its final decision, will be seen tomorrow. Till then be careful at 4043, 4075 and 4100 on the upperside and 3800-3850 on the downside.

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