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

Last week it was mentioned that ‘On hourly chart Nifty is falling towards its lower trend line support which is around 5815. Thus falling till 5815 is not at all ruled out. I highly expect Nifty to correct first and then to resume upside. The Derivative data suggests that the upper side for NIFTY Index is restricted at 6000. Technically speaking NIFTY index has formed “Dragonfly Doji” candlestick on Thursday followed by “Bearish Engulfing” candle on Friday. It is a bearish signal for the coming week.’

During the week Nifty index exactly acted as predicted it traded end-to-end between set sell zone of 5950-6000 (high of 5965) and buy zone of 5830 (low of 5839) before closing the week at 5879.

Sensex posted a new 52 week high of 19612 and since past two weeks Sensex is trading inside the long-term resistance zone between 19100 and 19800 but is still struggling to cross its long term resistance. Daily technical indicators are bullish, but correcting from overbought conditions.

Sensex should receive good supports from its 20 day EMA and the 19000 level. On the upside, expect resistance from the 19800 level and the top edge of the upward-sloping channel. Some more consolidation/correction is expected before the breach of the resistance zone.

The weekly chart of Nifty index has corrected after breaching the 5950 level. A convincing breach of 5950 should take the index to the upper edge of the upward sloping channel at 6150, before a meaningful correction takes place.

Weekly technical indicators are bullish, but showing signs of slowing upward momentum. The MACD has risen off its signal line. The ROC is still positive, but below its falling 10 week MA. The RSI and Slow Stochastic are both inside their overbought zones, but sliding down. Downside support is expected from the 5751 if at all Nifty corrects from here.

Conclusion: Nifty is still trading within the long-term resistance zones. Technical chart suggests that NIFTY Index is in overbought zone and index is not able to hold the gains at higher levels and closing near the low of the day consistently. The support for the NIFTY index remains at 5750 for the coming week. As mentioned earlier the upside remains restricted at 6000 for Nifty Index. It is likely to spend some more time within the resistance zones before breaching them. For the week watch consolidation/correction at 5838-6000 with extension to 5750.