ICICI Securities: Momentum Pick: January 11, 2011

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Market Snapshot
• Domestic equity benchmarks ended in the red for the fifth session in
a row as overseas investors continued to sell equities to begin the
new week. The Nifty plunged by 141 points or 2.4% to close at
5762.85 whereas the Sensex finished with a cut of 468 points or
2.38% at 19224.12. BSE Mid cap and small cap indices extended
losses by over 2% each. The market breadth was extremely negative
with 76% stocks on the declining side

• Realty, capital goods, oil & gas and banking sectoral indices tanked
over 3% each even as all sectoral indices closed in the red
Market outlook
• The Nifty opened on a negative note and immediately slipped lower
before attempting a bounce back from 5832 levels. However, the
bounce was short lived and the index soon ventured on a south
ward journey
• The action resulted in a long range bear candle, which achieved
equality to Friday’s fall in absolute terms (167 points from high to
low). The short-term trend continues to remain down. However, after
five days of fall the Nifty has reached extremely oversold position
with the RSI on the hourly chart displaying a positive divergence.
Such a set-up could attract a technical bounce back
• Since the September 2010 rally, the Nifty has not closed below 5750
levels. Even on Monday, the index managed to close just above
5750. While a close below 5750 levels would open further downsides
to test the 200 day EMA (5643), failure to do so for another session
could open up the possibility of relief rally
• For the coming session, the Nifty would face a major hurdle near
5824-5835, which is about 50% retracement of Monday’s fall. On the
flip side, failure to sustain above 5750 could trigger further selling
pressure and the Nifty could move lower to 5698 and 5643 levels
• MACD and RSI oscillators on the daily chart continued to display a
bearish picture
• Nifty spot has supports at 5750, 5698, 5643 and resistances at 5790,
5830