Weekly Outlook of Nifty from Aug 27th - Aug 31st

Last week it was mentioned that Nifty won’t be able to cross 5500 and suggested that aggressive traders can short when it heads near 5500 and others should start profit booking and it seems to be following perfectly on Technical Charts. Also had mentioned about 76.4% Fibonacci Retracement level at 5430 and how historically NIFTY index follows these Fibonacci levels. During the week index marginally crossed this retracement level by making high of 5448 and settled the week at 5390. Once again Index traded in a narrow range of 80 points. On Friday closing basis Index has formed “Doji” candlestick on the chart indicating indecision in the current bullish rally.

The market edged higher for the 4th consecutive week on hopes of monetary policy easing by the US and China to boost economic growth. The week closed the Sensex higher by 92 points at 17783 while the Nifty ended at 5386 gaining 20 points. FIIs continued their buying and DIIs continued their selling for another trading week. For the fourth straight week, Sensex has closed higher but the upward momentum is fading. Market players are probably getting tired of waiting for some positive policy actions.

In spite of all the gloom and doom surrounding the global economic down turn, policy inaction and the ever-increasing fiscal and current account deficits in India, the weekly chart of the Sensex seems to be happily moving up. The 20 week EMA has moved up to touch the 50 week EMA for the first time in more than a year.

The index has formed a bullish pattern of higher bottoms and higher tops since rallying from the Jun ‘12 low. A cross above the Feb ‘12 weekly high of 18524 should put the bulls back in control after nearly 2 years.

Political pranks had very little effect on the upward move of the daily chart pattern of the Nifty index. All three EMAs are rising and the index is trading above them. The Nifty has made a bullish pattern of higher tops and higher bottoms. These are all signs of a promising bull market. A convincing move above the Feb ‘12 intraday top of 5630 should send the remaining bears running for cover.

On the down side, the index should receive support from its rising 21 day EMA at about 5340, and stronger support from top of the symmetrical triangle near 5246.

Conclusion: Charts of Sensex and Nifty appear to be in the beginning of a new bull markets. Steady flow of FII money has countered the weak economic fundamentals and policy inaction. As long as the money continues to flow in, selling by DIIs will only slow down the bull rally but won’t be able to stop it. Do not expect to get rich in a hurry. Regular investments with proper assessment will ensure good returns. This week Index has taken a pause at critical Fibonacci retracement level. “Doji” candle formation on technical chart suggests that market participants are not sure about next move henceforth not ready for any fresh open positions. Coming week is an expiry week for August 2012 F&O series. Derivatives data suggests that 5300 and 5500 are going to act as strong support & resistance and index will bounce back and forth within these two levels till expiry. It’s better to book profits. And wait till we get some further confirmed signal for the next move.

Weekly Outlook of Nifty from Aug 21st - Aug 24th

Markets close the week firm with cautious optimism. The market closed the week in the positive on easing worries over inflation and sustained buying by the FIIs. The investors remained hopeful on economic reforms which lifted the sentiment enabling the market to close higher during the week ended on 17th August 2012. Global cues during the week remained a bit mixed with positive bias. However, the market appeared a bit nervous on last Friday after CAG’s reports on presumptive losses to the government on irregular sanctions of coal blocks, airport land and mining leases but despite these, the market managed to close the week with modest gains. There was no give up in FII buying.

An upward break out from a large symmetrical triangle, followed by a pullback to the top of the triangle and a bounce up is an indication that bulls are beginning to take control. All three EMAs have started rising and the index is trading above them. Technically, Sensex is back in a bull market.

Technical indicators are bullish, but about to correct from an overbought situation. The MACD is positive, and above its signal line. The ROC is also positive, but has crossed below its 10 day MA. The RSI is inside its overbought zone, but showing signs of turning down. The Slow stochastic is also inside its overbought zone, but moving sideways.

A bit of correction or consolidation appears likely. On the downside, the rising 20 day EMA and the top of the symmetrical triangle should provide support. On the up side, a cross above the Feb ‘12 top will put bulls firmly in control.

On the 1year chart pattern of the Nifty, an upward break out from eight months long consolidation within a large symmetrical triangle is clearly visible.

The 20 week EMA has moved up to touch the 50 week EMA; just as it had done earlier in Mar ‘12. But the Nifty was moving down in Mar ‘12 and the ‘golden cross’ did not take place. Looks like the bulls are determined to push the Nifty into a bull market this time.

Technical indicators are bullish. The MACD is rising above its signal line in positive territory. The ROC is positive and above its 10 week EMA, but showing signs of losing upward momentum. The RSI has risen to the edge of its overbought zone. The Slow stochastic has entered its overbought zone.

Few indicators are suggesting a likely correction or consolidation before any up move. On the down side, the top of the symmetrical triangle and the entangled 20 week and 50 week EMAs should provide support. A cross above the Feb ‘12 top of 5630 should restore the bull’s control.

Conclusion: Chart patterns of Sensex and Nifty are slowly returning to bull markets. Weakening economic fundamentals and policy inaction by the government do not indicate a runaway bull rally. But strong inflows of FII money seem to have changed market sentiments for the better. Stick to stocks with fundamentally strong, low debt companies. Certain indicators are almost in an overbought situation and profit booking can start on any day. The highest OI for Call options is at 5500 strike price suggests  lack of confidence about NIFTY index not crossing 5500 level in August 2012 F&O series. Keep in mind that the level 5430 is 76.4% Fibonacci Retracement level of the high of 5630 till the low 4770 made on 4th June 2012. History tells that NIFTY index obediently follows 76.4% retracement level as termination points for its current trend. So, better to start booking profits as Index approaches towards 5500 level and wait for next opportunity when market enters into correction mode. Aggressive traders can look for opportunity to short when Index heads near 5500.

Weekly Outlook of Nifty from 13th Aug - 17th Aug

In previous post I had mentioned that overall Market still looks positive and I still feel it is most likely and ready to test 5350-5402 level in coming weeks and the high was placed at 5394 for the week which is between the range of 5350-5402. During the week index behaved exactly as expected. Index on Monday morning market opened with gap at 5260 and it made a high of 5378 which was very close to the estimated resistance level and then closed the week at 5320.

The weekly chart pattern of Sensex has broken above the large symmetrical triangle pattern wherein it was consolidating for the past eight months. The 20 week EMA is getting ready to cross above the 50 week EMA; the ‘golden cross’ will technically confirm a return to a bull market. The bulls will try to avoid a repetition of the situation during Mar and Apr ‘12, when the 20 week EMA came close to the 50 week EMA, but failed to cross above it.

Technical indicators are looking bullish. The MACD is rising above its signal line in positive territory. The ROC is positive and is moving above its 10 week MA. Both the RSI and the Slow Stochastic are above their 50% levels. The top of 18524 should be the next target for the bulls. Crossover above will form a bullish pattern of higher tops and higher bottoms. If FIIs continue their buying, this target could be easily achieved.

Economic growth is slowing down, but not enough to change RBI’s declared policy of restraining inflation at the cost of growth. There is unlikely to be any interest rate reduction in the near term. Poor monsoon rains may further add fuel to the inflation fire. Stock markets may not perform well in a high interest rate regime. A period of slow growth and high inflation is likely to continue for some more time.

After breaking out of eight months of consolidation within the symmetrical triangle pattern, the daily chart pattern of Nifty quickly pulled back to the top of the triangle. Such pullbacks are quite common and provide entry opportunities for those who may have missed the break out.

Technical indicators are bullish, but three of them (MACD, RSI, slow stochastic) touched lower tops while the Nifty touched a higher top. The negative divergences may drop the Nifty back inside the triangle. The break out above the triangle wasn’t accompanied by significant volumes which raises questions about the validity of the break out.

All three EMAs are rising and the Nifty is trading above them. Technically, Nifty has entered the bull territory. A cross above the Feb ‘12 top of 5630 will put the bulls back in control. There may be some consolidation before the Nifty moves up to test its Feb ‘12 top.

Conclusion: Chart patterns of Sensex and Nifty have broken upwards from prolonged consolidation within symmetrical triangles. Though the break outs haven’t been strong, such break outs after long consolidations are often followed by strong up moves that can take the indices close to their Nov ‘10 peaks. It seems that the bear market may finally be getting over. On Technical chart Nifty has almost reached to its upper trading zone and has touched the upper level of Bollinger Band. It must close above 5400 level if this bullish rally has to continue. At the moment this looks difficult to cross the strong hurdle of 5402 and we can expect some downside in the coming week. However the upper side seems restricted at 5500 till the end of August 2012 series. The current data suggests that NIFTY index will not cross 5500 during this F&O series.

Nifty is moving in rising channel on Daily, 15 MIN and Hourly charts. So 5290 can provide a strong support for Nifty. A drop below can take it back to 5247 where one can initiate long with a stop below 5200.

Weekly Outlook Of Nifty From 6th Aug - 10th Aug

Last week I had mentioned to go Long with a stop below 5011 for target of 5350 and positive momentum was seen ahead of RBIs monetary policy review. The Interest rates were left unchanged for the second time, which was in line of expectations. There was some momentary reaction and NIFTY index was pulled down by 80 points from the day’s high 5234 on that day but overall Index closed with a decent gain of 115 points on weekly basis. The index is consolidating within a large ‘symmetrical triangle’ pattern. Since the triangle has been tested twice on the upper side and twice on the lower side, a break out may happen soon. An upward break out should be supported by a significant increase in volumes.

All three EMAs are beginning to join together. A sharp move could follow. Will the index move upwards and break out above the triangle, or will it move downwards? Since Sensex is in a bear market, the move expected should be downwards. But it is better to wait for the actual move instead of guessing it.

Technical indicators are mildly bullish. The MACD is touching its signal line, and both are just inside positive territory. The ROC is barely positive, but above its 10 day MA. The RSI is slightly above its 50% level. The Slow stochastic has entered its overbought zone, but showing signs of turning down.

A weak monsoon is threatening drought-like conditions in many parts of the country. A drought will further dent the prospects of economic growth and lead to a spike in food inflation. The oil prices have started rising again putting further stress on India’s balance of payments problems. With exports slowing down noticeably, don’t expect depreciation of the Rupee to reverse direction any time soon.

The weekly chart of Nifty has been consolidating within a symmetrical triangle pattern since touching its Dec ‘11 low. Last week, the index closed above its 20 week and 50 week EMAs after three straight weeks of lower closes. But this week’s volumes were less than the previous down week’s volumes. A rally needs volume support, without which it may not sustain very long.

Weekly technical indicators are looking bullish. The MACD is above its signal line and just about positive. The ROC is rising above its 10 week MA in positive territory. The RSI is trying to move above its 50% level once again. The Slow stochastic has moved down from its overbought zone.

Conclusion: Chart patterns of Sensex and Nifty are consolidating within large symmetrical triangle patterns. Break outs may happen in either direction from such patterns. Derivatives build-up clearly suggests that NIFTY is restrained within a range of 5000 & 5400. From Technical point of view index is trading right in the middle of the Bollinger Band. It tested the lower support line near 5000 on expiry day of July series and now progressing towards the upper level of the Bollinger Band which is 5400. Key technical indicators such as MFI and Stochastic Oscillators are showing positive strength. Thus overall Market still looks positive and I still feel it is most likely and ready to test 5350-5402 level in coming weeks. On down side, 5000 is an extremely strong support zone. While those who missed to enter in lower levels are advised to concentrate on less risky investment opportunity.