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.