Hurdle of 20-WSMA

Markets on February 13: Negative divergence

The Indian indices began the day on a healthy note. Thereafter the indices dropped from
the day’s highs and traded in a small range until mid afternoon, when markets gave a
positive breakout from the small range and thus cheering the bulls. However in the dying
minutes the markets pared gains, yet closed in green. Weekly charts depict that Nifty is
facing resistance around 20-weeks simple moving average (20-WSMA), and until this
average is cleared on closing basis, chances of bears stealing the game from the hands of
the bulls is higher. On hourly chart though Nifty has given a higher top higher bottom
signal, but the momentum indicator KST, which is having a negative divergence, does
not support that signal. Daily KST is still positive. Market breadth was positive. For
every single loser, there were 1.5 gainers.

On hourly chart, the gap between the momentum indicator KST and the signal line is
getting slimmer and negative crossover is about to occur. Both our short- and mid-term
biases are down for the target of 2775 and 2450 respectively with reversal packed at 2960
and 3111.

The Sensex and Nifty closed higher, up 169 points and 55 points respectively. The BSE
Midcap and Smallcap indices also closed stronger, up by 1.5% and 0.6% respectively.
Stocks from the metal and Realty led the gainers, while Health care stocks led the pack of
losers. From the 30 stocks of Sensex M & M (up 7%) and Reliance communication (up
5%) led the pack of gainers. On the other hand Sun Pharmaceuticals (down 3%) and
Ranbaxy (down 0.5%) led the pack of losers.