Weekly Outlook of Nifty from Oct 1st - Oct 5th

Last week it was mentioned that nifty would face some hurdles at 5740-5760 but momentum is strong for extension into 5900/5925. For the week, let us watch 5630-5925. Nifty managed to stay above 5630 placing a low of 5639. The good news is NIFTY has gone up by 500 points and has managed to close above the first barrier of 5630 so there are still some hopes for the further rise. During the entire week NIFTY tried to cross 5740 but retreated to its support near 5630 placing a low of 5639 for the week and then made yet another new weekly high of 5735.  

The 220 points gap in the daily chart of the Sensex was formed after the announcements by ECB and the US Fed about another round of QE3 and the Sensex still remains above the gap instead of filling it. The index is still reluctant below the 19132 resistance level. The zone between 19132 and 19750 is a long-term support/resistance zone. Also, the index is looking overbought as it is trading far above its 200 day EMA.

Technical indicators are bullish, but correcting overbought conditions. Expect a correction down to the top of the gap, or a sideways consolidation, before the bulls manages to push the Sensex above the resistance zone. If the gap remains unfilled, or gets partly filled, it will be a ‘measuring gap’ with an upward target of 20700 for the Sensex.

The bulls had taken support at 5638 forming a double bottom after consolidation and managed to close above 5700 first time after April 2011 but it still failed to close above 5740 placing a high at 5735 for the week. However the close above 2012 high of 5630 is very bullish into short/medium term. The index is facing strong resistance from the expected resistance zone between 5740 and 5760. The rising volumes indicate that the bulls may have sufficient power to overcome the resistance zone, but might be after a period of consolidation or correction.

Weekly technical indicators are looking bullish, but overbought. The MACD is rising above its signal line in positive territory. The ROC has crossed above its 10 week MA in positive zone. The RSI and the slow stochastic both are inside their overbought zones.

Conclusion: I would say that we are now very near to the upper target of the current rally and one needs to be very cautious. Index has sustained and closed above 5630 level so it cannot be denied that it may move further to the next target of 5900/5940.  On Friday, Nifty formed “Shooting Star” candlestick at the intermediate resistance line near 5740. Level 5630 is very critical support and should remain protected on closing basis for this rally to continue. The next important resistance is at 5740 (which I had mentioned in my last post). This week it made unsuccessful attempt to cross this barrier but in the coming week expect yet another strong attempt to cross this level. Note that above 5740, bulls will get ready to give a rally up to 5900. However, keep it in mind that 5940 level can act as a major turning point for the index. Looking at the charts it seems a bit tricky but current technical chart situation is that nifty is extending its wave pattern and it seems that market may touch 5940 level in October. Any close above 5740 will help nifty to target 5900/5940.

Weekly Outlook of Nifty from Sept 24th - Sept 28th

Few weeks back I had mentioned that nifty will not move above 5500 and will slide down to 5200-5246 and then it was mentioned that nifty will hold 5200 and would rally till 5700. Market exactly behaved, as predicted and hope all of you have minted tons of money.

Last week it was clearly mentioned that 5630 now seems a minor hurdle and we may witness an extended rally towards 5700-5740, and then the focus will turn to 5893-5924 see what has happened Nifty sky rocketed and placed a high of 5735 for the week.

During the week the government faced some political pressure for a roll back in policy reforms but it remained firm on implementing the decisions to allow FDI in retail and liberalize foreign investment in aviation and broadcasting sectors.

The weekly chart of the Sensex is in an up-trend. It has formed a bullish pattern of a higher bottom and a higher top, and touched a 52 week high of 18867. The ‘golden cross’ has technically confirmed a new bull market. Keep in mind that the Sensex is very close to the strong resistance zone at 19130 and 19800. Some consolidation or correction can be expected before the resistance zone is taken.

Inflation remains high, and the hike in diesel price has added fuel to it. Interest rates are also high and so is oil’s price. The exports have declined due to the economic slowdown in Europe and USA. The government needs to do a lot to control its fiscal deficit. The economic environment is not yet helpful for a runaway bull market. Equity sell-off in several PSU's has been lined up. That will put further strain on liquidity. It is better to be cautiously optimistic than being excitedly bullish.

The up-trend in the daily chart pattern of the Nifty remains intact. The gap up formed on Sep 14th at 5435-5530 was tested last week but was not filled. If the gap remains unfilled in the coming days, or gets only partially filled, then it may turn out to be a ‘measuring gap’ with an upward target of about 6198 for the Nifty.

Technical indicators are bullish, but looking overbought. The MACD is rising above its signal line in positive territory. The ROC is positive and above its 10 day MA. The RSI and the Slow Stochastic are inside their overbought zone. All four technical indicators failed to touch new highs as the Nifty made a new 52 week high. The negative divergences may lead to a correction or consolidation.

Conclusion: Chart patterns of Sensex and Nifty have entered new bull markets and one can use dips to enter. Now the next big oomph for the market is the bailout package for power distribution companies which will be taken up on Tuesday. On technical front Nifty has crossed its first barrier at 5630 and now the focus has turned to 5900. The Derivative data suggests that Bulls still have lot of potential to take the index further up. The unwinding positions at 5700 strike price Call options indicates that the expiry for September 2012 in the coming week is likely to be in a range of 5700-5800 level. However Nifty will face some hurdle at 5740-5760 but momentum is strong for extension into 5900/5925. For the week, let us watch 5630-5925. The strategy is to hold on to investments and add on correction into 5630-5550 for upside of 6000.

Weekly Outlook of Nifty from Sep 17th - Sep 21st

Last week, it was mentioned ‘technical chart confirms that Index has taken a support from the significant level of 5200. This means NIFTY index is once again getting ready to give a breakout above 5450. So, above 5450 the next target for NIFTY index is around 5630 level’. NIFTY Index hit 5587 and Nifty fut. placed a high of 5598 which is very close to the target of 5630. During the entire week Bulls were on rampage and NIFTY Index gave a massive 200+ points up move placing a new weekly high of 5587. One may term that this up-move has been triggered by international news and events but the technical charts and derivative data had already suggested strong signals prior to this news flow.

During the week market rallied across the globe on big news events from US markets. It is merrymaking time for Indian equity market despite suspect macroeconomic fundamentals. The sovereign rating downgrade fear is out of the way now. The loose monetary policy in western economies till 2015, some bold steps from the Government to open up FDI and shift into growth supportive monetary stance will act as boosters for extended rally.

There was a huge gap up opening in the Sensex and it needs to be filled quickly. However Technical indicators are bullish, but beginning to look overbought. When bullish sentiment is strong, an index or stock can remain overbought for long periods. Two of the indicators The RSI and MACD are showing negative divergences by touching lower tops while the Sensex moved higher.

If you enter for longs, keep a stop at the lower edge of the gap at about 17970. On the up side, there is a strong resistance zone between 19130 and 19800. Some consolidation and correction can be expected at or near the resistance zone before the Sensex can move up to test its Nov ‘10 top. On the downside, support can be expected from the uptrend line and the 50 day EMA near 17495.

The weekly chart of Nifty index has technically entered a bull market as the golden cross has happened. The uptrend from the Dec ‘11 bottom is now approaching a strong resistance zone between 5700 and 5950. Some correction or consolidation can be expected before the Nifty overcomes the resistance and tests its Nov ‘10 top.

Technical indicators are looking bullish. But the negative divergences are hinting at a correction.

Conclusion: Chart patterns of Sensex and Nifty are in up trends and have entered new bull markets. For the past few weeks, investors were suggested to buy fundamentally strong, low debt companies. There are several such companies which are still available at reasonable valuations. Start accumulating them at every dip.

RBI Governor has a tough task ahead, the monetary policy on Monday. However banking and other related indices have gone up on hopes that Diesel price hike will prompt RBI for rate cut. Nevertheless inflation in August was higher than expected which may wipe-out the hopes for any rate cut.

On technical chart, 5630 seems a minor hurdle now. If RBI on Monday comes up with any surprises for the market then it is useless to mention that bulls will go wild. However there are some negative divergences but I don’t think it may be difficult to take out immediate strong resistance at 5630 for extended rally into 5700-5740 and to turn the focus into 5893-5924.

Crude Sept 14th

Crude oil's consolidation from 98.29 continued last week and outlook remains bullish. Crude Oil prices advanced 1.43% and ended, closing at 98.20; on speculation demand for oil might rise from its largest consumer the US, after the Federal Reserve took steps to boost the economy.

In the Asian session, Crude Oil in the morning was trading at 98.94, 0.75% higher from yesterday’s close. Crude oil is expected to find support at 97.25, and a fall through could take it back to the next support level of 95.56. However it is expected to find its first resistance at 99.88, and a rise through could take it to the next resistance level of 100.83 thereafter targeting $105.

With 92.94 supports intact, further rally is still expected. Above 98.29 will extend the rise from 77.28 to 100 psychological level and above. However, as noted before, such rise could be the fourth leg inside the triangle pattern from 114.83. Hence, remain cautious on topping between 100 and 110. Meanwhile, break of 92.94 will be the first signal of reversal and turn focus to 86.92 level support for confirmation.

Looking at the chart, it appears that we are going to rise above the $100 mark. $100 should give way relatively quickly, and as such I feel that the $105 level is probably where it is heading next. As for selling, I simply would not advice.

For intra-day Crude oil is expected to find support at 97.25, and a fall through could take it to the next support level of 95.57 and it is expected to find its first resistance at 99.88, and a rise through could take it to the next resistance level of 100.83.

Silver Sept 14th

Silver's rally extended to as high as 33.77 last week with a strong close at 33.725. Silver prices rose 4.02% at 34.57 per ounce during the 24 hours ending. In the Asian session, Silver is trading at 34.67, 0.30% higher from yesterday’s close.

Silver is expected to find support at 33.26, and a fall through could take it to the next support level of 32-31.86. Silver is expected to find its first resistance at 35.51, and a rise through could take it to the next resistance level of 36.35.

Initial bias remains on the upside and current rise from 26.105 could now continue to 37.58 resistance. Nevertheless, be cautious on reversal signal as it approaches 37.58. On the downside, below $32.00 minor support will turn bias neutral and bring consolidation. But break of 30.195 is needed to confirm near term reversal. It’s better to be cautiously bullish.

In the long term picture, the main question remains on whether 49.82 is a medium term or long term top. With 61.8% retracement of 8.4 to 49.82 at 24.22 intact, price actions from 49.82 could eventually turn out to be a consolidation phase only. And a break above $37.58 resistance will significantly increase the chances of a new high above 49.82.