US stocks rallied on Friday after a speech by Federal Reserve Chairman Ben Bernanke raised hope the Fed could consider further stimulus measures for the economy at an extended policy meeting in September.
Initially stocks fell after Bernanke stopped short of detailing plans to strengthen the ailing economy. But the market turned higher as investors surmised the Fed was leaving the door open for action.
At closing bell, the Dow Jones industrial average was up 134.72 points, or 1.21%, at 11,284.54. The Standard & Poor’s 500 Index was up 17.53 points, or 1.51%, at 1,176.8. The Nasdaq Composite Index was up 60.22 points, or 2.49%, at 2,479.85.
About five stocks rose for every declining stock on the New York Stock Exchange, while about four stocks rose for every declining stock on the Nasdaq.
Indian ADRs ended mixed on Friday. In IT space, Infosys was up 1.57% at $ 48.41, Wipro was up 0.31% at $ 9.56, while Patni Computers was down 0.26% at $ 11.59.
In telecom space, MTNL was down 5.52% at $ 1.54 and Tata Communication was down 2.01% at $ 8.29. In banking space, ICICI Bank was up 0.58% at $ 36.13 while HDFC Bank was down 0.2% at $ 30.3.
In other sectors, Dr Reddys Labs was up 0.38% at $ 31.73, Tata Motors was up 0.26% at $ 15.5 and Sterlite Industries was up
0.37% at $ 10.9.
Last week, the Sensex opened at 16907.57 attained a high at 17256.46 and fell to low of 16432 to finally close the week at 16839.63 and thereby showed a net fall of 466 points on a week-to-week basis.
A High Wave candle formation has been formed after the fall on the weekly chart, which suggests that a momentary pause to the fall is being witnessed with volatility. Unlike all the other candles we talked about earlier, this formation is neither bullish nor bearish. It is a neutral candle and is a single candle formation. The first rule for this pattern is that the real body must be small. Secondly, it must have a very long upper shadow and a very long lower shadow. Finally, high wave candles generally come after a large rally or a steep decline when there is a lot of emotion in the air. In this context, a sharp decline on the Sensex was seen. Psychologically, this candle indicates that the market is confused. It shows that the bulls and the bears have waged a fierce battle and the result is a draw. This means that sideways price movements can be expected.
Further weakness may be seen below 16432. Volatility will be between 16432 and 17256 during the week. On a further fall below 16400, the slide will get extended towards 15960, 15650 and 15330 with the objective to move towards 13219-12256 range. If the recovery has to come before 13219, then it could be from the current level or by testing 15960, 15650 or 15330 levels. The recovery has to be so strong that it must cross the resistance gap on the daily chart which is at 17358 to 17664.
The possibility of a minor pullback remains in the attempt to test the gap and try to cover as much as possible. A strong close above 17666 may mark the low as the bottom. In that case, the objective would be to test the recent low of 19132. Weekly resistance will be at 16842-17253-17305-17664. Weekly support will be at 16400 and 15604.
Minor pullback towards resistance level cannot be ruled out in an attempt to halt the fall. Further weakness may continue below 16400.
Strategy for the week
Traders who are short can keep the stop loss at 17664. Sell further on a fall below 16400 with the high of the day as the stop loss or 17310, whichever is higher. Expect the lower level of 15960, 15650 and 15330 at least.
Welcome to WordPress. This is your first post. Edit or delete it, then start blogging!