Engulfing bear

Markets on June 8, 2009: Realty and Metal lead the turn down

The Indian markets ended the day on a weak note as selling activity persisted till the final
minutes of trade. Towards the end of the day, the overall decline to advance ratio was
poised at 6.5 to 1 on the BSE. Sensex ended the day lower by around 437 points, while
the Nifty closed lower by about 157 points. Stocks from the mid-cap and small-cap
spaces ended the day on a weak note as well, recording losses of 5.45% and 5.8%
respectively. On daily candlesticks charts, Sensex has formed a bearish engulfing pattern
(a bearish reversal pattern) around 61.8% retracement level of the entire fall from 21k,
which is not a good sign. On hourly chart we are having a negative divergence, which
indicates that Nifty should at least fall back up to the lower line of the channel. Also the
market has violated the hourly averages, one more reason for the bears to cheer.

Hourly momentum indicator KST has given a negative crossover. Our short-term bias is
revised down for the target of 4200 with reversal packed at 4640, while our mid-term bias
is still up for the targets of 4850 with reversal packed at 3861 respectively.

Selling activity was witnessed in stocks from across the board led by realty, metal,
banking and capital goods. Stocks from the IT space, on the other hand, ended the day in
the green. From the 30 stocks of Sensex Wipro (up 3%), Infosys (up 3%) and TCS (up
2%) led the pack of gainers, while Jaiprakash Associates (down 10%), DLF (down 10%)
and Tata Steel (down 10%) led the pack of losers.