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.