Weekly Outlook of Nifty from Oct 22nd - Oct 26th

Last week it was mentioned ‘The possibility for the coming week still remains bearish as PCR (Put/Call Ratio) has now dropped below 1.0 this week. Consider 5630/5600 as a critical support level for NIFTY index and a break below can trigger a fall up to the gap of 5450’. During the week Nifty posted a low of 5633.9, and placed a high of 5722 closing the week at 5684 nevertheless the mentioned critical support of 5630 still continues to hold.

For the entire week Nifty traded in a very narrow range consolidating between 5630-5730 without showing any significant price movement. However the most significant point is that it survived above the mentioned estimated critical support zone of 5600/5630.

FIIs remained net buyers, but their buying eagerness has faded a bit and DIIs continued to be net sellers. The 20 week EMA has provided a good support and the index as expected corrected after hitting the strong resistance zone of 19132/19750. Expect support from 18524/18284.

The daily chart pattern of Nifty index is stuck in a narrow 100 points range. The 20 day EMA has not only provided good support to the index but has also continued to rise. The 50 day and 200 day EMAs are also rising, indicating the uptrend in the Nifty remains present. However any corrections would improve the technical health of Nifty chart.

Daily technical indicators are turning bearish. The MACD is positive, but falling below its signal line. The ROC is in negative territory, and below its 10 day MA. The RSI is still above its 50% level but is sliding down. The Slow stochastic still looks bullish.

The up move should resume in the near future.

Conclusion: In the earlier post of Oct 8^th I had suggested that the upper side is capped at 5800 in Nifty for October series.  The Chart patterns suggest corrective modes after touching strong resistance zones. Nifty fut forming a Doji shows a clear sign of indecision among the market players. Nifty for coming week still looks bearish. After touching the strong resistance zone, it is struggling hard to find the next direction. NIFTY Index is consolidating in the range of 5630-5730. The ability to hold above strong short term base at 5630-5580 does provide good comfort but there is no strong momentum to take out immediate resistance at 5740-5760. Western bourses are weak and uncertainty in domestic cues (with weak rupee) is keeping investor confidence low. The preference would be to remain aside till it breaks this range because prices will move very fast once this horizontal channel is broken. Traders can keep a close watch on (OI) at 5600 Put options. If the unwinding continues then it will surely break below 5600-5630 support zone and traders can take full advantage for the fall till 5581/5530/5450.