Weekly Outlook of Nifty from 25th June- 29th June

Last week I had mentioned that the Index is hovering near important resistance levels and overcoming resistances convincingly may change the trend to a bull market. But certain indicators are not supporting such a possibility. Also mentioned that 5187 is much of importance now and Crossover above convincingly would mean Bulls will be on charge to lift the index right up to 5301-5366 in a very short period.

I had clearly mentioned to go short near 5187 for a target of 5080. What happened next it placed a high of 5191 for the week and got knocked down to 5031.

However it is important to note down that in spite of RBI’s decision to keep key policy rates unchanged, our market did not give up on the recent gains. NIFTY reacted with a fall of around 150 points from its high of 5191 on Monday but managed to recover the losses during rest of the week. It also tried to cross critical resistance around 5160 on couple of occasions but failed to close above it.

Sensex is near its 200 day EMA, but has not been able to cross above convincingly.

The technical indicators are showing positive divergences by touching higher tops while the Sensex reached a lower top. The 20 day EMA and the signal line of MACD have formed bullish rounding bottom patterns.

Technical indicators are bullish The MACD is rising above its signal line in positive territory, but the histogram is falling. ROC is positive, but has dropped below its 10 day MA. The RSI and Slow Stochastic are in their overbought zones. However Sensex needs to move above its Feb 2012 top of 18524 to form a bullish pattern of higher bottoms and higher tops.

The weekly chart of Nifty indicates that the last hurdle on the up move now is the 50 week EMA. Once the 20 week EMA crosses above the 50 week EMA, a return to a bull market will be confirmed technically.

Technical indicators are showing signs of strength, but haven’t turned bullish yet. MACD is rising, but remains below its signal line in negative territory. ROC has crossed above its 10 week MA, but is still negative. RSI has emerged from its oversold zone, but is below its 50% level. Slow stochastic has climbed out of its oversold zone to reach its 50% level.

Conclusion: Chart patterns of Sensex and Nifty are showing signs to cross above important resistances and enter into bull territory. On technical chart, Index is trading above the Trend Line since 3 weeks now. Crossover above 5187 level convincingly would mean the current rally will continue targeting 5300-5366. Enter slowly, and select fundamentally strong large-cap companies. Beware of a bull trap. Keep suitable stop-losses. The critical support for the bullish rally remains 5000-4973.

Weekly Outlook Of Nifty from 18th June -22nd June

Last week I had mentioned that 5139-5187 range is a difficult zone for NIFTY and it requires big trigger to cross this resistance zone. During the entire week it tried to take away this resistance but failed. I had also specified that market would give some reflex reaction as it enters into this difficult zone and after placing a high of 5124 there was a drop till 5034. But this reaction was momentary and Nifty closed the week at 5147. The lateral thinking is Nifty Index has exactly closed at 5139.

NIFTY was well supported by rate cut expectation sustaining well above 5000  but did not generate enough momentum to take out the strong resistance at 5187 (high was 5156) but weekly close at 5147 is bullish into the near term. Over all, domestic and external cues turned supportive for the NIFTY but despite these strong forces, inability to take out 5187 is a worry.

Last week’s rally was accompanied by falling volumes as Nifty climbed above its first resistance of 5139 and tried to overcome key resistance of 5187.

Technical indicators are bullish, but looking overbought. ROC and slow stochastic have reached overbought levels. RSI is well above its 50% level. The MACD has risen above its signal line into positive territory.

Elections in Greece over the weekend and RBI’s policy announcement on Monday June 18th are being eagerly awaited by market players. Market players are hoping for some positive triggers in the coming week to take the index higher. Any negative surprises may strengthen the hands of bears.

Heavy writing of Put options and at the same time unwinding from Call options suggest that Option Writers who generally drives the market movement are betting on Bullish side and nearly confirms that market is balanced for another breakout depending on RBI’s monetary policy on Monday 18^th June. 5200 call up side has highest open interest with 6447350 contracts. Still 5200 call has highest writing. Nifty future closed at 5147 up by 1.85% and open interest increased by 4.81%, indicates that fresh long has been build-up in the market on Friday.

Conclusion: Chart patterns of Sensex and Nifty are hovering near important resistance levels. Overcoming resistances convincingly may change the trend to a bull market. But certain indicators are not supporting such a possibility. From Technical point of view Nifty is continuously making efforts to cross 5187. Therefore 5187 level is much important. Crossover above would mean Bulls will be on charge to lift the index right up to 5301-5366 in a very short period. The risk factor to this move remains on disappointment from RBI which can drop Nifty to 5080-5000-4975 which should hold.

But I expect a down move with volatile session on Monday 18^th June. Risk takers can go short near 5187-5200 with a stop at 5239 for a target of 5080. Others should wait till the events are unfolded till next week before deciding to jump in or out.

Weekly Outlook Of Nifty from 11th June-15th June

Last week I had mentioned for a quick investment return, near 4624 for eventual test and break above 5000; also mentioned that if nifty breaks 4757 it would create panic selling till 4624 and even 4538. Finally 4757 the key support provided salvation for the bulls placing a low of 4760 and as predicted panic buying was seen providing biggest percentage gains since the beginning of 2012.

During the week Index behaved exactly as expected. On Monday, Nifty opened at 4775 and after placing a low of 4760 it started moving up. It then managed to sustain above this crucial level of 4757 and then as predicated Bulls were in full form.

Lot of talks about rate cut announcement by RBI by 25 bps. However lot will depend on the IIP and inflation numbers next week. Nevertheless it acted as a strong positive trigger and it can still act more strongly if there is any rate cut but do not forget that governor had already hinted about less room for further rate cuts in 2012. Globally, the disposition seems to be positive by expectations of another round of harmonized monetary easing by developed nations. Now the next question is whether the rally is sustainable?

Technically, the weekly chart of the Sensex has given a sharp pull back to the trend line. And technically such pullbacks provide selling opportunities. Any further up move needs to overcome resistances from 17010-17212.

The technical indicators have come out of oversold conditions, but are bearish. The MACD is below its signal line in negative territory. The ROC has crossed above its 10 week MA, but remains negative. The RSI and Slow Stochastic have come out from their oversold zones. Keep in mind that two of the technical indicators the RSI and Slow Stochastic both have touched lower bottoms as the Sensex touched a higher bottom. The negative divergences may choke the rally.

On the daily closing charts of Nifty, things are beginning to look bullish. The index has closed above the down trend line, and also above the mark of 5066 which is the 200 DMA. It needs to close above the 200 day EMA backed by strong volumes for at least 3 days. But volumes are dropping off as the index is rising placing a question mark on the sustainability of the rally.

Technical indicators are looking bullish. The MACD is rising above its signal line, but remains in negative territory. ROC is positive and above its 10 day MA. The RSI is above its 50% level, but its upward momentum is getting shallow. The Slow stochastic has entered its overbought zone.

Conclusion: The technical chart suggests the next hurdle is the Trend Line resistance at around 5139-5187. Therefore 5139-5187 levels are likely to act as a resistance in the coming weeks. NIFTY would require some big trigger to cross this resistance and move ahead. Market is eying at RBI monetary policy announcement on 18^th June. Though it can be a strong positive trigger if there is any rate cut but as of now it looks quite difficult for Nifty to cross the resistance at 5187 and I expect some reflex reaction when Nifty enters between 5139-5187 levels.

Weekly Outlook Of Nifty From 4th June - 8th June

Last week I had suggested that nifty is in a bear market and may face strong resistance at 4980 and 5000 levels nevertheless it managed to cross and touch 5011 but it was a failed attempt and got banged on touching the down trend line.

The Q4 GDP data has come at 9 years low and market started to slide. India’s trade deficit is continuously rising, which remains a key concern for market sentiments and new worries are arriving from Europe, Greek and Spain creating panic worldwide. Considering all these aspects our markets will also remain uncertain and may create more panic or remain highly volatile.

Sensex daily chart pattern suggests a typical bear market pattern that formed during May. The index dropped sharply below all three EMAs and the downtrend line. It wasn’t a great surprise that the Sensex pullback terminated exactly at the downtrend line.

The technical indicators have turned bearish once again and seem to suggest that it may fall much lower. The MACD is negative, and about to fall below its signal line. The ROC has entered into negative territory touching its 10 day MA. The RSI has failed to move above its 50% level, and is moving downwards. The Slow stochastic is about to fall below its 50% level. Possibility and breach of 15135 is on cards.

Nifty index made an attempt to pullback towards the downtrend line and faced strong resistance. The higher volumes last week, indicates probability of more selling pressure in the coming week. However, support for NIFTY will be from RBI’s shift into helpful monetary stance. The shift into surplus liquidity and low interest rate regime will attract investments into equities. It is also expected that the Government will act to prevent crisis in the Indian economy. Based on these expectations, immediate weakness near 4500 can attract investors.

The technical indicators are looking bearish. The MACD is falling below its signal line in negative territory. The ROC is negative, and below its 10 week MA. The RSI is dropping below 30 and Slow Stochastic is inside the oversold zone. Technically on chart nifty is on major downtrend and is getting ready for a negative breakout. The test and breach of 4614 remains a possibility.

Conclusion: Sensex and Nifty have witnessed short pullback rallies and are getting ready to test their Dec 2011 lows. Breach of 4757 will create panic selling and can knock down nifty to 4634 and even 4530. The global economic outlook isn’t bright. The strategy is to get invested on immediate weakness near 4624-4550 with a stop below 4500 for eventual test and break of 5000 and 5600 in the short term. The market looks good for investment opportunity providing a 1000 point reward on a risk of less than 100 points. A break and close below 4500 nifty will surrender to bears; keeping in mind Vix closing above 200 DMA will be a big time trouble for bulls so remain strict on your investments.