Are we still not Over Bought????

Giving some relief to government, inflation for January has come down to a two year low at 6.55% from 9.47% last year. This number was 7.47% in December. CRR cut is also on the verge.

Rating agency Moody’s warned that it may cut the triple-A ratings of France, Britain and Austria and it downgraded six other European nations including Italy, Spain and Portugal, citing growing risks from Europe’s debt crisis.

Sensex closed higher above 18000 levels but Nifty failed to close above the 5600 levels. Indices surged more than 3% in a week. Midcap were the flavors for the week. Midcap index gained more than 5%, Small Cap 3%. Realty sector closed higher by 1%, Power Index 3%. Auto index closed down just 0.5%. Bhel gained nearly 17% in a week. The stake sale news triggered the buying speer. Axis Bank gained 14%, Rel power gained 19% after the announcement of its results. SBI gained 11%, Rcom which have roped Standard Chartered and DBS for its under sea cable unit have falred the stock more than 10%. Idfc 10%.

The money have been drained out of the banks due to gaining cash payments during state elections, intervention to stabilize the rupee, and slowing loan repayments by companies, now calls for a cut in the Cash Reserve Ratio to boost the liquidity.

My last article read “Are We over bought????”, seems to be some what true. Nifty made a high of 5606, and acted as if its very hard to trade in the market. We had some correction also in the week, but the same old story was repeated. FII’s inflow helped to market surged ahead. Nifty made a high above 5600 but failed to close above the same. As mentioned in my article also about the importance of the Fibonaci retracement levels. We can clearly see in the chart, the last 4 trading session. On Tuesday Nifty managed to close above the 100% retracement levels from the high of 5380 and low of 4531 levels. On Wednesday opened with a gap and on the last trading session Nifty made a high exactly on the 123.6% retracement levels, and but found some selling pressure as it has a very strong resistance levels.

As discussed in my last article also that the MACD is on the verge of giving negative divergence, that may be seen in this week. RSI is trading higher and might turn negative anytime. As soon as there is negative divergence we might see Nifty falling down to 5400-5350 levels. Traders are requested to setback.

FII flow since start of this month have grown to Rs.21K Cr. DII have sold stocks worth Rs.13K Cr. Sensex rallied from 17000 to 18000 in just 12 trading session.