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.
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