Weekly Outlook of Nifty from 25th Feb to 1st March

From the beginning of the month I had mentioned to go short at 6045-6060 with a stop at 6085 for target of 5850 what happened next Nifty fut high was at 6078 and spot Nifty high was at 6053 and as expected nifty corrected till the given target. During the week NIFTY made a low of 5836 and closed the week at 5850. 

For the past many sessions the Sensex is trading in a corrective way within the long term resistance zone between 19000 and 19800. As long as the support level of 19000 is not breached, and the 200 day EMA continues to rise, the bull market is not under any threat.

The weekly chart of Nifty shows four straight weeks of correction. The good news for the bulls is that the 20 week EMA has provided a good support so far. However a further fall is likely to receive strong support from the 5750 level which is the lower edge of the resistance zone and below it, from the rising 50 week EMA.

Weekly technical indicators are suggesting that the correction is still not over. The MACD has crossed below its signal line and has slipped from its overbought zone. The ROC has dropped below its 10 week MA into negative territory. The RSI is still above its 50% level. The Slow Stochastic is falling towards its 50% level.

The signal is mixed and the comfort is from FIIs staying invested despite sharp reversal to 5850. It seems to remain mildly bullish on the belief that no unpleasant surprises will be in store in the Budget FY14.

On the chart one can notice an H&S formation with Neckline at around 5800 level suggesting Nifty at critical support line. So, technically speaking one must stay alert if Index breaks this critical support of 5800.

Nifty weekly chart is suggesting a sell signal and daily chart is getting little oversold. The market seems to be caught in a narrow range of 5800-6000. The Put options buildup still suggests that Index will hold 5800 level. The ‘Put call Ratio’ is at 0.84 which is nearly in oversold territory and Nifty Index generally bounces back from this zone very sharply. Nifty 6000 call has highest open interest suggesting upper boundary for near term.

In fact if Index reaches around this level then it will be a shorting opportunity for NIFTY traders. For the week, watch 5800-5975 consideration to higher end, but not ruling out extended weakness into 5750 for set up of strong post-budget rally.