NIFTY Outlook for near term

NIFTY was on a technically oversold category and we saw a volume climax around 5480 - 5500 odd levels. In past five trading has rallied almost 300 odd points. This looks like a classic bear market rally. 

The fundamentals are supportive looking good for the near term with the dip in crude oil prices and gold (precious metals) which India are one of the biggest importers. This would reduce the burden on CAD. Also the WPI inflation has reduced below below 6%. The RBI policy action on May 3rd 2013 can be a key trigger for the markets to go ahead further. On the expectation of repo rate cuts with positive fundamentals rate sensitives have rallied specifically bank nifty. Also banking results posted (Induind and Yes bank) are outstanding beating the street expectations. 

      

NIFTY Daily chart

Basically, the index move is supported by Bank NIFTY, which  is the leader in the rally along with some support from Infra, PHARMA, FMCG and Autos. The laggards were IT and metals both under performing relatively. Overall, NIFTY has a stiff resistance around 5800 - 5850. The trendline break above 5820 will reaffirm the further move upwards towards 5950 and further. Although there is no indication of any weakness as of now both technically and fundamentally traders are advised to be cautious after a sharp rally. The risk on rally is going on bu the charts are showing classic lower top and lower bottom formations. 

There can be a consolidation around these levels in the index before the next move. The FNO expiry on 25th April next week, result season going on and further on May 3rd 2013 RBI policy action can spike up the volatility. 

NIFTY Daily Fibonacci Chart

The 23.6% retracement of rally from 4800 - 6100 odd levels comes around 5800 and also a fall from 6111 - 5477 retraces 50% at 5800 range. So confirming the resistance zone with the trendline as shown in above daily chart. Technically 5800 - 5850 is a resistance zone as of now. Break above on can initiate long positions and short traders are advised to watch out for 5750 and 5690 are support zone. The break below can lead to further fall in Index to 5300 - 5400 range ahead If bears unfold.

So trade objectively and wisely with the consideration of own risk with amid volatility. The strategy would be to wait patiently for the right opportunity to unfold to probable profitable trade setups.

Raju V Angadi

 Equity Research Analyst

 Fortuna Financial Boutique (FFB)

 Bangalore, India.

 To know more about probable counts contact us back on rvangadi@googlemail.com 

Disclaimer: This is just an view based on the research of individual. So kindly trade along with the consultation of your financial adviser, market trends, price action and own risk appetite considered while investing or trading in stock markets.