Nifty closes below critical trendline

IN THE past three days, the Nifty has lost 3%. After Thursday's decline, the index closed below a very critical trendline that joined its corrective lows since March 2009, which is the point from which the markets rebounded. Following the recovery, this trendline was respected several times, including last week. However, with the Nifty closing below 20 Day Moving Average (DMA) with a significant gap for the first time in almost two months, there are indications that the index could remain under pressure at the 5,040-5,080 range.      On the downside, initial support is expected to come from the lows of the first two weeks of October 2009 near 4,940. A breach of this level, however, would indicate that the Nifty is eyeing the support of a trendline joining the intermediate highs since August 2009. This trendline coincides with the 50-DMA (4,815), a crucial mediumterm indicator.      The October Put Call Ratio (PCR) has further declined to 1.31, its lowest level in 10 trading sessions, after Thursday's liquidation. This decline was attributable to gains in the Nifty October 5,100 calls, which added more than 19 lakh shares in open interest since the start of this week. Moreover, in the past two sessions, the build-up in 5,000 calls has also gained momentum indicating that the range will be difficult to breach.  STOCKS F&O  Jaiprakash Associate has lost 10% in the past two trading sessions. The stock's winning streak since early October was halted by a trendline joining its highs in June-August 2009. On Thursday, it closed below its 20 DMA and a trendline joining corrective lows since July 2009. Upsides could remain capped at Rs 245.