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.