Weekly Index Outlook from 26th March-30th March

In my earlier post I had mentioned to keep a close watch on 5305 and below could witness selling towards 5244-5206. Nifty precisely tested and placed a low of 5205.65 and from there we witnessed a sharp U turn the next day. Nevertheless the Coal scam triggered a sell-off in the strong consolidation phase.

The weekly chart pattern of the Sensex shows five straight weeks of losses which is the negative factor and the positive side is that the index has still managed to close above its 50 week EMA. The upper edge of the Falling channel is also providing good support to the index. However Sensex is consolidating within a falling wedge pattern suggests bullishness.

The Nifty chart technical indicators are looking bearish. The MACD is falling below its signal line, and about to enter negative territory. The ROC has dropped below its 10 day MA into the negative zone. Both the RSI and the Slow Stochastic are below their 50% levels.

Conclusion: We can expect the index to consolidate for some more time before a break out. Coming week is an expiry week and derivatives build-up suggests that NIFTY index will hold 5170-5178 level before expiry. I expect that if Index holds this level then it would definitely try to test 5400 which is the upper edge of the Symmetrical Triangle which was mentioned in my last post. Traders are advised to take full advantage of this breakout in the coming days. Good time to enter fundamentally strong large cap stocks.

Weekly Index Outlook from 19th March-23rd March

As expected NIFTY rose up to 5500 but seemed like Market had a clue on RBI policy and started giving up on early gains after placing a weekly high of 5499. Many had expected the budget to come out with a clear direction for the economy and the stock market. All the hopes went into vain. Nevertheless, the big Union Budget turned out to be a “non-event” day for financial market. Market has reacted to this budget and Index lost nearly 200 points from week’s high. Although Budget provisions were hardly exciting, but there weren’t any negative surprises as well.

The weekly chart of the Nifty index closed marginally lower, but is trading above its 50 week EMA. But there are negative patches on cards; the index has closed lower 4 weeks with substantial volumes which indicates distribution.

The technical indicators are bullish, but showing signs of weakness. The MACD is positive and above its signal line. The ROC is positive and above its 10 week MA, but forming a bearish pattern of lower tops and lower bottoms. The RSI is above its 50% level. The slow stochastic is also above its 50% level.

Index had found good support around 5200, but was unable to reach up to the recent high of 5600 and has started forming “Symmetrical Triangle” pattern. It would be interesting to see whether this pattern breakout gives reversal signal or continuation of uptrend signal.

Conclusion: The likely outcome in the near term is some sideways consolidation till the supply-demand equation between bulls and bears get resolved. NIFTY traders can go long near 5200 and take short positions near 5500 for some quick gains. Watch 5200 put option and 5500 call option for the next signal. Addition in 5200 put OI would act as support where as decline in OI for put option would provide signs for a downside breakout. Do not expect a runaway bull market as long as interest rates and oil prices remain high. Keep an eye on 5305 any close below can drag down Nifty to 5244 and 5206.

Weekly Index Outlook from 12th March-16th March

Last week I had mentioned about the resistance at 5428 & below 5245 selling pressure can be witnessed till final support at 5200-5166. During the entire week Nifty made a precise high of 5428 and exactly found the support at 5200 placing a low of 5201. Now this is important to note that nevertheless it precisely resisted at 5428 but also found a clear good support at the technical support line of 5200 and bounced back in a huge way with a long tailed candlestick which again signifies buying demand near the support levels. Significant accumulation of 5200/5300 strike price Put options along with ‘Out of the Money’ call options is a clear signal of participants anticipating the RBI policy in a positive frame and the week ended in a surprise CRR cut by 75 BPS.

Conclusion: Keep eyes on Nifty spot above 5458 as it will again turn back with a positive momentum towards 5600 levels. However positional shorts can keep a stop above 5458 and lower level longs can trail their stop to 5400 once it manages to cross 5458. Any close above 5406 on Spot Nifty can act as a trend deciding level and a potential reversal week. However the Union Budget may decide whether this would be a short lived rally or a fresh bull market rally.

Weekly Index Outlook from 5th March - 9th March

Last week, I had mentioned that the index has strong support at 17273 and 17000 also suggested to stay invested with this stop-loss and 5200 in nifty. The low for the index was 17381 and the nifty was 5268 and a U turn was seen from these levels.

The week opened to huge profit booking on Monday and the index lost nearly 3%. Nifty took support near 5254 which is the falling trend line of the downward channel. The technical chart shows that Friday has closed with a ‘Doji’ candlestick suggesting indecisiveness between the bulls and the bears.

On the daily chart the Sensex has managed to stay above the down trend line which is a positive sign for Bulls. But the failure for cross-over of the 50 day EMA above the 200 day EMA has prohibited a technical confirmation for a bull market.

The technical indicators have turned bearish. The MACD is falling below its signal line in the positive zone. The ROC is negative and below its falling 10 day MA. The RSI has dropped below its 50% level. The slow stochastic has dropped to the border of its oversold zone.

A rise in crude prices is making the markets nervous. The markets will show future directions on UP state elections, RBI policy, and the Union budget. The only brighter side seen is that the RBI may cut rates in order to fuel growth in the economy.

Conclusion: The chart patterns of Sensex and Nifty are going through a correction mode after a sharp rally. Corrections provide opportunities to those who missed the earlier rally. But this doesn’t mean one has to buy anything and everything. The resistance for the next week is seen at 5428 and support is seen at 5245. However derivatives data suggest breach below 5245 a panic selling can be witnessed towards 5200-5166. Keep an eye on the upcoming events and decide further trades. Traders are advised to be optimistic with caution.