Sunday, January 24, 2016

Ready for upward pullback - NIFTY View For Week 25-29 Jan

In this newsletter read about how much upside to expect in Nifty. I will also speak about whether current low is Nifty bottom. 
I had mentioned a support to Nifty at 7368-7194 level. This support is nicely held by Nifty to give a upward bounce of more than 170 points from its low. Global markets are giving positive indications. Most Asian, US and European indices closed in green to end the week. 
Question Is this the end of fall and start of new rally?   
Technical Overview: Last week Nifty made high of 7471 and low of 7241 to close at 7422. A range of 230 points. On weekly technical charts Nifty has formed a bullish doji pattern. This pattern indicates immediate upcoming upside. The overstretched fall, oversold nature of indicators and the Doji pattern formation gives us indication that Nifty can have some upside from current level. 
This upside can continue till next resistance of Nifty. Resistance is at 7514-7600. If this resistance is broken, further resistance is at 7718-7798 level. The expected upward movement in Nifty is just a pullback in ongoing downtrend of Nifty. Major trend still remains down. 
If Nifty breaks below 7193, it can have major downfall till next support near 6869. However this downmove may take sometime to come about. It is market's nature to surprise everyone. So be ready for sudden moves as India VIX is still trading above 18. And we have major event of budgets lined up ahead.   
My View: Nifty seem to be ready for a sharp upward move. This move may last longer than expected. Check the trend line in chart below. I have uploaded 2 charts depicting shorter and larger pictures. The trend lines gives us much lower target of say 6800 if it breaks below current level. Short term traders can play on long side for a pullback. Long term traders can create short positions on rise near resistance.  
Wise man's act: Patience and discipline will pay you in markets. Not only the analysis. Our Nifty and Banknifty Strangles have tested our patience this month. But seems it will pay off to give us profits. More on this on next weekend.  
Check the influence areas (supports and resistance on chart below)