Nifty 4650 vital for bulls to pitch

The last week was positive for the markets as the bulls managed to prevail over the bears. The Nifty closed above the 4450 hurdle with relative ease. The surge was led by the technology and the mid-cap segments as the banking stocks lagged relatively. The turnover was up smartly as conviction levels were higher.

The weekly combined exchange advance decline ratio was positive at 11793:7638.

The overseas cues were positive as the Dow Jones Industrial Average closed near its six-month high.  The index is at the verge of confirming an inverse head and shoulder pattern, which will be confirmed above  9175 on a consistent closing basis with higher volumes.

If the trader participation and economic news flow improves, the logical head and shoulder pattern target for the Dow Jones index by April 2010 can be up to 11000. That can be a major trigger for the domestic markets as the overseas cues will boost trader confidence in domestic markets significantly.

Technically, the Nifty has closed near its congestion close (June 05/June 12, 2009), which is the highest the index has managed to close after the election results triggered a steep rally.

The bulls will need a close above the 4650 levels to offer significant follow-up buying support needed to bolster the markets hereafter.
The weekly range advocated last week between 4675 and 4100 has held as the Nifty traded between these levels.

The coming week is likely to witness the Nifty trend between the 4725 levels on the upside and the 4250 level on declines. The bullish pivot will be at the 4500 level and the bearish pivot at the 4450 level. Watch these thresholds on a closing basis as the near-term trends will be determined between these levels.

The bias still remains upwards barring routine profit taking bouts.

lachman.ramchand @gmail.com