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Nifty (11922) - Buy All Declines, Major support Zone 11550-11600

The much awaited “General Election” outcome is finally here and the BJP (303 seats) lead NDA (350+ seats) has finally got the clear mandate to rule and build up “New India” for next five years, till 2024. The favourable outcome for the incumbent government was some what discounted by the markets on very first day of trading, of last fortnight. The Index opened with an upside gap of 250+ points and ended the day with whopping 400+ points gains at 11828. On the day of Final results, we saw huge volatility, as the Nifty traded in 400+ points range between 12041 and 11614. Since the General Election results are finally out, after initial volatility, Nifty has once again resumed its uptrend and ended at new all time high close at 11922.

In our last fortnightly report, we had mentioned that 11900-12100 range is crucial resistance for Nifty and a decisive breakout above 12100 will see Nifty adding couple of hundred points on the upside before any profit taking comes.

Currently, Nifty is facing resistance from the “Supply line” of “Up sloping Trend Channel” and finding resistance from the 138.2% extension level (@11919) of Index’s rally from 10004 lows (26th Oct 2018) to 10985 highs (20th Dec 2018). A decisive breakout above the 12150-12200 zone will not only take the index beyond the “Supply line“ of the trend channel but will also take it past 161.8% (@ 12172) Extension levels. This breakout will clear way for Nifty rallying towards 12500+ levels in weeks ahead.

Complete Analysis

Interestingly, after the election results are declared, Nifty is making similar pattern on daily charts as it made after 2014 “General Elections” outcome. In the charts given below, we can compare the Nifty move after the election results of 2014 and 2019.

In 2014, when final results were out, we saw huge volatility in index (more than 400 points between 7563 and 7130) and for coming 10 sessions, the Nifty consolidated in this one candle range and then finally witnessed a breakout and continued to rally higher as the month progressed. A Major correction in Nifty unfolded only when its reached the 261.8% Extension level (@ 9138) of its pre-election rally from 5118 to 6332 . Nifty registered a high of 9119 in March 2015.

This time again in 2019, Nifty has shown huge volatility of 400 points on the result day and after initial profit taking it is once again placed near the all time highs (@12041).

If previous move of the Nifty is to be replicated this time again, then, in the coming months, we will witness gradual upmove in Nifty and it will finally target 13150+ levels (261.8% Extension level of Nifty first pre-election upmove from 10004 lows to 10958 highs), before any larger degree correction unfolds, both value-wise and time-wise. On the downside, now the range of 11600-11590 (Exit poll day’s lows @ 11591 and result day’s lows @ 11614) has now emerged as a very crucial support and till the time this support zone is not violated on weekly closing price basis, the ongoing upmove in Nifty will remain intact and it can rally minimum towards the 13100+ targets in the coming months.

SHORT TERM VIEW (2-4 Weeks):

Nifty is currently trading near the major supply zone of 11900-12150. In the coming sessions we could witness high volatility in Nifty in the wide range of 11600-12000. On the downside, now 11600-11590 has now emerged an important support and only a decisive breach of this support zone on weekly closing price basis will trigger another round of selloff.

We advise short-term trades to buy Nifty on all decline towards 11700 levels with a stop loss of 11550 (on closing price). Our immediate upside target is 12100-12200 zone.

MEDIUM TERM VIEW (3-6 Months):

We continue to remain bullish for Medium term on Nifty and expect it to rally higher in coming months. On Upside, 12100-12200 is major supply zone for Nifty and once this supply is absorbed, we will witness a sharp rally in markets initially towards 12600 levels and then finally rally towards 13100+ levels by the end of this year.

We advise Positional Trades to hold/accumulate more Nifty between 11900 and 11600 zones, for medium term price target of 13100+. We are now trailing our stop loss to 11400 (on Monthly closing price) from earlier 11100 levels.


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Author: lfspms

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