Weekly Outlook of Nifty from 30th July - 3rd Aug

NIFTY is unable to retain its momentum that triggered the 5095-5348 rally and since then posting lower highs at 5257/5238. Sensex had a lower weekly close for the third straight week. The 20 week EMA failed to cross above the 50 week EMA and the index is trading below. A test of support from the trend line at 16366 seems pending. A drop below the trend line will give bears total control. An upward bounce with volume support will give bulls some hope.

There is comfort that worst is behind in the domestic sector with the Government set to act soon. This will be followed by RBI’s growth supportive and favourable monetary environment. The cues from external sector are not negative at this stage. Global investors are back into “risk-on” mode and expected to stay invested into Q4 of 2012. There will be good appetite for Indian stocks from FIIs. Taking all these together, downside risk seem to be limited. The market has already priced-in concrete actions from the Government and RBI’s pause mode on 31^st July.

Weekly technical indicators are turning bearish. The MACD is barely above its signal line, and about to drop into negative territory. The ROC is above its 10 week MA, but has started to move down. The RSI is still below its 50% level. The Slow stochastic has slipped down from its overbought zone. Sensex is still in a bear market, and likely to look for lower levels.

Rate cut hopes are fading. FDI is slowing down and so are exports. Rupee is depreciating against the US Dollar. Inflation is still not reasonable. Well-known companies are being investigated for fraud and tax evasion. Everything is going negative.

The daily chart pattern of Nifty is trading below all three EMAs, which have moved very close to each other. A sharp move usually follows. The only way for the move to be upwards is if FIIs start buying in huge volumes. It is Possible but seems unlikely. So, prepare yourself for a sharp down move at any time.

Technical indicators are bearish. The MACD is falling below its signal line, and entered negative territory. The ROC is negative, but has moved up to touch its falling 10 day MA. The RSI has come out from its oversold zone. The Slow stochastic is inside its oversold zone.

Conclusion: Chart patterns of Sensex and Nifty are falling back into bear markets, after brief rally into bull territory. The expectation into the near term is for build-up of strong base at 5100-5000. If the Government delivers to expectations, a smart rally into 5350 will be witnessed and delivery beyond expectations will get the focus at 5600. It is important that the Government avoid sending disappointing signals which would generate sell-off below 5100 into 4815/4770. For now, let us watch 5100-5350 and would prefer bullish extension into 5600 in due course. The strategy is to stay invested with stop below 5011 for 5350/5600. It seems the time hasn’t developed for bottom fishing. Stick to regular investments in quality stocks. If in doubt, stay out and preserve cash.

Weekly Outlook of Nifty from 16th July - 20th July

Last week I had mentioned that interest rates and inflation are still quite high unless both start dropping, there is not going to be a runaway bull market. Also had mentioned that the entire rally from the closing low of 15965 has formed a bearish rising wedge pattern, from which the likely break out is downwards. But suggested that Nifty will try to attempt 5430 and it would provide good support at 5215 and 5159 which could be used as a buying entry point. What happened next! Nifty made a high of 5364 and then received support near 5215 placing a low for the week at 5228. Do you know what was the low of NIFTY INDEX? It was 5216.85.The markets closed with significant declines last week with all sectoral indices closing negative. The Sensex and Nifty were down 1.6% over the week. Quite a bit of disappointing week for NIFTY traders. Index traded within a narrow range of around 5220 and 5350 without giving much of trading opportunities.During the start of the week banking stocks reacted very aggressively on a hope that RBI would follow the path of central banks in China, Europe and the UK. In fact bank index contributed majorly to push NIFTY index towards 5350 mark on Tuesday. But Q1 results of INFY triggered stronger selling. However, TCS, came out with better results and prevented further panic.The weekly chart pattern of Sensex shows a ‘reversal week’ pattern that formed last week. Though the index received support from its 50 week EMA, it seems the support may not hold in the coming week. Such a ‘reversal week’ pattern usually terminates an intermediate rally the way it did when the previous rally got terminated in Feb ‘12.The index touched a higher bottom in Jun ‘12 than the one it touched in Dec ‘11, but has so far failed to cross above its Feb ‘12 top. A similar pattern was formed a year ago when Sensex touched a slightly higher bottom in Jun ‘11 than the one it touched in Feb ‘11. The subsequent rally failed to rise above the Apr ‘11 top, and the index dropped much lower. Is the pattern likely to repeat? The possibility can’t be ruled out. Only a move above the Feb ‘12 top of 18524 can push the bears on the back foot.Technical indicators are giving mixed signals. The MACD is above its signal line, and has just entered its positive zone. The ROC is positive and above its 10 week MA. The RSI is looking bearish it has slipped below its 50% level. The Slow Stochastic has entered its overbought zone. The 20 week EMA is trading below the 50 week EMA, which means the Sensex is technically in a bear market.A ‘rising wedge’ pattern had formed on the daily chart pattern of Nifty as well, from which a ‘gap down’ break out occurred last week. However, the ‘gap down’ break out is quite bearish.The good news for bulls is that the index has found support at its 20 day EMA. The still awaited ‘golden cross’ has yet not happened which can confirm a return to the BULL market.Technical indicators are still bullish, but showing signs of slowing upward momentum. The MACD is positive, but has crossed below its signal line. The ROC has dropped sharply below its 10 day MA into negative territory. The RSI has dropped from its overbought zone. The Slow Stochastic has fallen sharply from its overbought zone.Bears may use any pullback towards the ‘rising wedge’ as an opportunity to sell.

Conclusion: Chart patterns of Sensex and Nifty seem to be in danger of falling deeper into bear markets. Key Technical Indicators such as RSI and MFLDX are showing downward journey after touching the overbought zone. But multiple support lines around 5150 are seen on the chart. Also, the 50 day EMA is around same support zone. Therefore 5150 level is definitely a buy level for some quick gains in the coming week. Also do not forget that Nifty has formed ‘double bottom’ on the daily chart. So till 5215 is holding we can see Nifty again back above 5300 levels. If broken will fill the gap between 5159-5215. It is time to be cautious in speculation. High inflation and high interest rates are not favorable for bull market. Regular investments in blue chip companies should not be stopped. I would suggest buying Nifty around 5159 with a stop below 5090 for a target of 5400.

Weekly Outlook of Nifty from 9th July - 13th July

Last week I had mentioned that immediate hurdles are seen at 5339 and 5379 and Nifty will try to touch 5400. However Nifty struggled a lot for the entire week between 5339-5379 and closed at 5327 for the week.

The 20 day EMA has crossed above the 200 day EMA. The 50 day EMA is forming a bullish rounding bottom pattern and is getting ready to cross above the 200 day EMA. The entire rally from the closing low of 15965 has formed a bearish rising wedge pattern, from which the likely break out is downwards. No certainties; but when a bearish pattern is clearly visible, it is best not to bet against it.

Technical indicators of the Sensex are bullish. The MACD is rising above its signal line in positive territory. The ROC is positive and above its 10 day MA. The RSI and Slow Stochastic are both inside their overbought zones.

If you are long and entered at lower levels, maintain a trailing stop-loss below the gap of 5159-5215 and stay invested. If you are feeling ‘left-out’, having missed the rally, keep your calm and wait for the correction to enter.

The weekly closing chart pattern of Nifty shows rising volumes. The 50 week EMA has started to rise. The 20 week EMA is getting ready to cross above the 50 week EMA.

Nifty has touched a higher bottom on the week end, but the RSI and slow stochastic touched lower bottoms. The negative divergences may stall the rally.

As per daily and weekly charts Nifty is in strong bullish mode. Bearish Harami Candlestick pattern has formed on NIFTY daily chart on 06/07/2012.
As per RSI, NIFTY is in over bought territory with a value of 83.72 on daily chart.
As per fast stochastic, NIFTY is in over bought range with a value of 94.15 on daily chart. As per slow stochastic, NIFTY is in over bought range with a value of 94.15, indicating reversal may happen any day, but still it has not given any reversal sign.
NIFTY is still trading above 50,100 and, 200 days Simple Moving Average.

Conclusion: Chart patterns of Sensex and Nifty are looking bullish. But some bearish patterns are also visible. Remember that interest rates and inflation are still quite high. Unless both start coming down, there is not going to be a runaway bull market. Stick to quality large-cap stocks.  It seems that Nifty will make an attempt to achieve the target of 5430 in the coming week where there are multiple resistances. Hence expect heavy profit booking around this level. The support zone for the coming week is in a range of 5159-5215. This support will be provided by 200 day EMA and the gap zone which is open since 29^th of June 2012.

Weekly Outlook of Nifty from 2nd July - 6th July

Last week I had mentioned that the Index is showing signs to cross important hurdles and enter into bullish territory and also mentioned that once it crosses 5187 convincingly the rally will continue targeting 5300-5366. What next Nifty after consolidating between 5095-5200 targeted 5300(the high was 5310) on Friday.

Most factors have turned bullish now for equity market; western economies are in heavy stimulus to maintain bullish suggestion into the short term and domestic cues are looking good with PM at the rudder of economic and monetary activity. It is believed that all recent disappointments will be addressed on issues related to capital account flows, fiscal deficit and growth. This should also lead to global rating agencies taking a favorable stance on India. But one needs to wait for action before jumping in.

The weekly closing chart of Sensex has comfortably moved above its 20 week and 50 week EMAs. A ‘golden cross’ of the 20 week EMA above the 50 week EMA will technically confirm a bull market. The Sensex needs to move above its Feb high to form a bullish pattern of higher bottoms and higher tops.

Weekly technical indicators are turning bullish. The MACD has crossed above its signal line, and is ready to enter its positive territory. The ROC has climbed above its 10 week MA. The RSI has moved up to 50% level. The Slow stochastic has moved sharply above its 50% level.

It seems everything has been set for a return to bull market– but expect some corrections.

However, FIIs bought heavily on Friday Jun 29th. And if they continue their buying binge in the coming week, Nifty may shoot up above its Feb top and technically confirm a bull market.

Technical indicators of Nifty are looking bullish. The MACD is rising above its signal line in positive territory. The ROC has moved up and is about to cross its 10 day MA in positive territory. The RSI and Slow Stochastic are at the border of their overbought zones. Any pullback or correction is likely to be brief.

Conclusion: Sensex and Nifty have crossed important resistances and have entered into bullish zones. Choose good large cap stocks, and maintain suitable stop-loss levels to avoid getting caught in a bull trap. The immediate hurdles are seen at 5339 and then at 5379 and the major supports are seen at 5190-5121. For the coming week it seems that NIFTY will definitely try to touch the next target of 5400-5415 levels.