The Hindu Business Line : Further weakness likely in Nifty

Preferred view: The much-awaited correction materialised during the week. The index moved in line with expectations and bounced off the support level at the 2300-2305 range mentioned last week.

The price action was devoid of any momentum in either direction.

The near-term trend hinges on the direction of the breakout from the trading range that the Nifty is at present confined to.

The immediate resistance is placed at the 2390-2410 band; support is at the 2310-2320 range.

A close below 2300 would have bearish implications while a close above 2430 would impart bullishness.

Though there are no conclusive signs of the reversal of the earlier uptrend, the index movement in the following weeks would have major influence on determining the near-term trend. Holders of long positions in the Nifty may have a stop-loss at 2310.

Comments: After a sharp fall in the early part of the week, the index staged a sharp recovery at the end of the trading session on Thursday. The expiry of the futures and options contract for August appears to have had a major influence on price movement on Thursday.

The recent developments, especially in the weekly candlestick charts continue to portray a bearish picture.

After the occurrence of the "doji" pattern, followed by the "spinning top" pattern, the index completed a "hanging man" pattern this week. This is not a positive sign and indicates the probability of further weakness.

Besides, there a lurking threat in the form of a potential "head and shoulder" pattern emerging in the near term. A failure to move past 2427 coupled with a drop below 2290 would be an early warning of the emergence of this pattern in the daily charts.

Investors may continue to book profits on every rally, especially in index stocks.

As observed in earlier weeks, the long-term bullish view remains intact. The index appears to be on course to move to the target zone of the 2550-2600 range.

Investors may consider fresh exposures as and when fresh "buy" signals are triggered.

SENSEX (7680.22)

Preferred view: The index ruled weak as anticipated last week. It dropped to the target zone of the 7500-7550 range and reversed direction subsequently.

The near-term trend depends on the movement in the week ahead. A close above 7950 would reinstate bullishness; a drop below 7530 would have bearish implications.

CNX IT (3075.25)

The index continues to rule below the critical resistance at the 3100-3110 range. As observed in earlier weeks, only a close above this range would impart strength. The possibility of a drop to the 2830-2840 range would be valid as long as the index rules below the resistance level.

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