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.