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.