Nifty could tumble all the way to 4680, rupee to 50.40

Special to Firstpost

S&P CNX Nifty (4,867.75): It was quite an eventful week for the equity as well as foreign exchange markets. As highlighted last week, the index’s failure to get past the centreline of the downward sloping trend channel was an early warning sign of impending weakness. ( See chart )

The index made a decisive move this week and closed well below the bearish trigger level of 4,910. The Nifty could now target the lower parallel of the trend channel at 4,680. The short-term trend would remain bearish until the index closes above the crucial resistance at 5,230.

Short positions may be considered on a rally, with a stop-loss at 5,230, for a target of 4,680. The bearish view is also corroborated by the weakness in the Indian rupee. The technical indicators suggest that the US dollar could appreciate to Rs 50.30-50.40, which strengthens the case for a fall in Indian equities.

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[caption id=“attachment_91413” align=“alignleft” width=“380” caption=“The Sensex closed below the negative trigger level of 16,400 mentioned last week.”]  [/caption]

BSE Sensex (16,161.06): The Sensex too closed below the negative trigger level of 16,400 mentioned last week. The short-term outlook is bearish and the index could test the immediate support at 15,600.

The major support for the Sensex is at 15,300, a close below which would throw the gates open to the 13 July 2009 swing low of 13,219.

Larsen & Toubro (Rs 1,452.25): After a minor consolidation, the stock appears to have resumed its prior downtrend. The chart patterns suggest that the stock could slide to the major support at Rs 1,310.

The immediate resistance is in the Rs 1,530-1,560 range. Short positions may be considered on a rally, with a stop-loss at Rs 1,610 for a target of Rs 1,310.

Hindustan Unilever (Rs 331): The stock has been an outperformer in the past few months and the recent downward correction offers an opportunity to consider long positions. ( See chart )

The stock could rally to the immediate resistance at Rs 362. Long positions may be considered on weakness, with a stop-loss at Rs 298, for a target of Rs 362. A breakout past Rs 362 would lend momentum to the uptrend and could propel the stock to the major resistance at Rs 398.

(The views and recommendations featured in this column are based on a technical analysis of historical price action. There is a risk of loss in trading. The author may have positions and trading interest in the instruments featured in the column.)