Nifty may Revisit 8500, Traders Should Stay Light

Broader Range for the week: 8520 —­ 8776 Immediate probable trading range for the next week: 8587 ­— 8668.

Neal Bhai Reports — Nifty may Revisit 8500, Traders Should Stay Light — Nifty slipped into sharp decline during last week and closed the week lower by around 1.3%. It is currently placed at the key support of around 8540, which is a swing low of the last couple of months. But, there is lack of any emergence of strong buying interest so far. The negative sequence of lower tops and bottoms is still intact. The larger timeframe, like weekly chart, is indicating weak strength on upside bounce back. The formation of long upper shadows as per weekly timeframe is signaling an emergence of selling pressure on every rise. The formation of repeated long range bear candles is also displaying strength of bears at this moment.

What could investor do:

The overall bearish chart and negative indications of momentum oscillators are suggesting a possibility of yet another weak upside bounce back attempt for this week (maximum up to 8700 levels) after initial weakness. After this, Nifty is expected to revisit or break below 8500 levels. The ultimate downside target for Nifty is around 81508050, which could be achieved in 1-2 months. One may look to exitbook profits on long trading and some investment positions on any rise and also consider creating short positions on the rise. Sectorally, banks, auto, realty, capital goods & pharma may underperform.


The week ahead: The Nifty future may find support around 8520 and 8587 on the downside (8520 is the 123.6% price extension drawn from low of 4592.40 to high of 6349, and 8587 is the 123.6% price extension drawn from low of 4538 to high of 6349) The Nifty future may find resistance around 8668 and 8776 on the upside (8668 is the swing high made for the week ended 28-11-2014, and 8776 is the 138.2%


Where are we: Our persistent cautious stance has played out well for us. Though, the index has closed a bit below the 8600 mark, it has managed to defend the crucial support of 8540­8518 successfully. This support zone coincides with the multiple technical evidences such as the daily ’89 EMA’, `Neckline of Head and Shoulder’ pattern, and a `Parabolic SAR’ on weekly chart.

What is in store:

In spite of hovering around such strong support zone, we expect the Nifty to slip shortly. This cautious stance is laid on the basis of few key observations such as the formation of `Shooting Star’ pattern and the negative placement of the `RSISmoothened’ on weekly chart. In addition, this week we saw yet another development in the form of `Negative Directional Indicator (-DI)’ cutting the `Positive Directional Indicator (+DI)’ from southwards in ADX (14) on weekly chart. Due to this, the possibility of breaking the `Neckline’ level of (8540 ­ 8518) the `Head and Shoulder’ pattern on daily chart has increased. In this scenario, an immediate correction towards 8400­8287 cannot be ruled out.

What could investors do:

This hypothesis remains valid as long as the recent swing of 8745.80 on hourly chart is not violated. Thus, short-term traders are advised to take into account all these scenarios and key levels while trading, and stay light on positions. price extension drawn from low of 4592 to high of 6349) The nifty future has closed at the lower level of the weekly charts showing selling pressure at higher levels.The volumes were less as compared to previous week showing weakness in the down move. Nifty futures closed above 8587. If it remains below 8587, then immediately on the upside it will find resistance at 8668. A close above 8668 can take Nifty to higher level of 8776. Buying at lower levels is advisable in the band mentioned below. We assume a bullish trading session for the next week. We expect, next week, the Nifty futures will break this week top of 8775.90.

Broader range for the week: 8520 ­ 8776 Immediate probable trading range for the next week: 8587 ­ 8668. — Gold Silver Reports

Nifty may Revisit 8500, Traders Should Stay Light


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