Nifty Weekly Technical Forecast: Short-Lived Reaction Possible

Nifty Weekly Technical Forecast: It can be noted that, after a rigorous start, the Nifty (निफ्टी) was more in to ranging forthe balance of the week. This is also quite in line withthe expectations that the market in May would range, albeit at a higher level. So far, that is the case.

Note how the weekly ranges are building up one on top of the other. This is typical in a marketthat is still driven by the bulls.

On the daily chart, these appear as a series of smallbody candles following some strong bullish candles, so continue to confirm the bullish status.

This has now improved higher towards 17,600 (from 17,500 earlier), and that is the nearest stop that swing traders may keep on their long Nifty positions.

Ideally, those that have been following the analysis in these columns have been advised to go long at the end of March (Nifty 17,000), with an expectation of 18,050 by end-April; this target was further revised to 18,450 by the end of May, and therefore, they should be holding long positions.

Obviously, some profit would have been booked along the way, but I trust some core long positions should have been maintained, as time cycle analysis was used to project a bullish time lasting till the last week of May. It is only in June that pullbacks have been indicated. The letter from a couple of weeks ago suggested that long positions should be held till May and that only in June should one consider shorting. Thus, one should have been awarded with 1,000–1,400 point move on the Nifty so far (and counting).

When playing the market using such an approach, it is always prudent to keep the stops at a safe distance so that ‘normal’ market volatility doesn’t get us out of positions quickly. But for those who find this level a bit too far (i.e., giving up a good chunk of what has been gained), they can adopt other stop-loss methods such as a near-term moving average, a P-Sar, or a supertrend. These can help lock in more of the gains.

Using other Gann methods, I can work out a nearer stop-loss level at 17,950, where some geometric points meet, and this is also the site of a former gap zone.

Armed with these, I guess readers can plan their campaign in the market. In the last letter, I also indicated that the time window between May 15-20 may provide some weakness, and that is set for next week. So, be a bit wary of declines that may begin early next week and last up to Friday. I expect trends to turn up on May 23 and stay up till the end of the month.

One of the ways this down cycle can be avoided for the next week is if the Bank Nifty stays strong. It has given a good signal as of Friday, regaining an important price level that may now drive the prices of the BN Future towards 44,100 levels. The trends here can then stay strong till May 19. This places the trends of the two indices at loggerheads. It is possible that the two can make independent moves, but it is unusual for the two to travel opposite each other for several days. Since Bank Nifty is the more heavily traded index, I may want to bet with it in case of advances. But if Bank Nifty trends align with the Nifty (i.e., it too goes down, failing to capitalise on the Friday move), then we should have a quick and sharp decline in the next week.


So, most certainly, this is a week to be on alert for some action for certain in the indices. Now, how much of this will translate into stock action is a guess. I wouldn’t want to hazard that. There, I would prefer to go with the bigger trend and look to be a buyer towards the end of next week.

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Neal Bhai has been involved in the Bullion and Metals markets since 1998 – he has experience in many areas of the market from researching to trading and has worked in Delhi, India. Mobile No. - 9899900589 and 9582247600

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