If Nifty breaks 5610 today, tumble is likely: Jai Bala

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If Nifty breaks 5610 today, tumble is likely: Jai Bala

The market has stalled this week after seeing a spectacular rally in the last two weeks. Jai Bala, chief market technician, cashthechaos.com says, the short-term trend is upwards until 5,610 holds. According to him, the upsides are capped at 5,720-5,750.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » ALSO READ See previous views by Jai Bala See what other Experts & Brokerages are saying about Suzlon Energy See messages about Suzlon Energy Suzlon Energy BSE | NSE 29/05/12 Are Mutual Funds betting on Suzlon Energy? Other Stocks in this news ITC | Hindustan Unilever | Marico | Gillette India | Lanco Infratech | GVK Power & Infrastructure | Punj Lloyd | IRB Infrastructure Developers | IVRCL | Tata Consultancy Services | Reliance Industries | Bharat Heavy Electricals | ICICI Bank |

The market seems to have stalled after seeing a spectacular rally in the last two weeks. However, Jai Bala, chief market technician at cashthechaos.com believes that downward move is currently lacking pressure. He is, nevertheless, quick to add that if the Nifty breaks 5,610 today, there could be some short-term downside pressure. "In fact, the market could tumble to 5,480 levels," he cautioned.

"If 5,610 holds, the trend is upwards in the short-term; though the upside aren't too huge- I will be working with 5,720 to 5,750," he told CNBC-TV18 in an interview.

Also read:  Market may consolidate until earnings kick-in, says Udayan

Below is a verbatim transcript of his exclusive interview. Also watch the accompanying videos.

Q: What is it looking like, is the Nifty stalling below its 200 day moving average (DMA) or is it just consolidating before moving further up?

A: The markets are hesitating near big resistance. The downward move is currently lacking pressure, which is good news in the short-term for the bulls but today's session is probably going to be crucial. If it breaks 5,610 on the Nifty there could be some short-term downside pressure.

But the trend in the short-term is up and anybody who is long should hold on to their longs and there could be little more upsides possible over the coming weeks if 5,610 holds as the market is lacking downward pressure, or at least it looks like its lacking downward pressure in the short term.

Q: If you were to buy around this zone then what kind of upside potential would you be working with?

A: The upsides aren't too huge in the short-term, I will be working with 5,720 to 5,750 on the upside that is given the caveat that 5,610 holds. But once 5,610 breaks, the chances of market continuing to go up in the short-term will again come down and the downside will come down to about 5,480.

So in the extreme short-term we are working with a range of about 5,480 to 5,750, it all depends on 5,610 not breaking.

Q: When you look at the medium-term charts for this market, does it look like something has changed substantially whether in terms of a higher base for the market or the fact that it could get to past 6,000?

A: On June 20, it looked as if the lows of February is going to give way but from then on it has been quite a good rally from here on. But they have completely dropped the pattern now; it's a very neutral picture over the medium-term. We cannot say the uptrend for the medium-term has turned up as long as 5,954 is taken out. Once 5,954 is taken out, the medium-term picture will change and we can look at about 6,100. But until that it's going to be a range of about 5,700 to 5,200.

Q: How important or significant a role would the Bank Nifty play in all of this because that looked a little weak yesterday?

A: I had mentioned several months ago that the possibility of selling pressure coming down in SBI and other banks. That has played out. Banks have had a decent rally. But what happened over the last two days is that they are actually trying to establish downward trend line. If the Bank Nifty continues to decline, it won't be good news for the bulls or the downtrend will start to resume. It will start to target about 10,500 on the Bank Nifty. So, yesterday's decline in Bank Nifty is a bit worrisome for the bulls. But it is anybody's game at this point in time.

Q: This has not been an India specific rally; it's been a global rally in a sense. What are the global charts suggesting to you? Is there more upside there when you study them?

A: If you look at the S&P, it looked like a powerful decline was underway. I mentioned the 1,249 level as key level for S&P 500. But the market actually headed towards that level and bounced back. Now yesterday's high is very crucial, 1,345-1,347 on the S&P is very important level. If it does take out that level on a closing basis, I think a new high is potentially coming. And if it doesn't take out, the rally from the June lows is actually corrective. So, it's a very crucial level even for the global markets.

If you look at the last two days price action in the dollar index, it has been a very strange price action, dollar index has been going up, gold has been going up, crude has been going up, stocks has been going up. This action for the last two days is pretty intriguing. We have to wait and watch what is going to transpire over the next couple of days.

Q: From a technical perspective, can you say with greater conviction now that 5,200 is the floor for the market? Last time too at 5,177 there was lot of pessimism and it did not break down, this time too it approached 5,200, but did not break down. Are multiple bottoms getting formed around that level of support?

A: This question can be answered if you look at the market from a longer-term perspective. If you look at the markets ascent from 2008 lows to the November 2010 highs, the correction is much shallower than technical patterns warrant. That is the reason why I was working with the case of Nifty going to about 4,800. 5200 is too shallow for the long-term correction to be complete.

But that said, these corrections can get truncated and they can stop short of the ideal levels. Right now, it's too early. If 5,480 in the short-term gives way, I think the markets are going to this time make at attempt at 5,200 and I think this time it will break. But until 5,480 holds, 5,200 does not come into the picture in the short-term. But the medium-term charts to long-term charts still warrant a correction upto the ideal level of about 4,800.