Nifty (11712) – Stay Invested, 11650 – 11550 Major Support Zone

18th April 2019
lfspms
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Nifty (11712) - Stay Invested, 11650 - 11550 Major Support Zone

Since our last fortnightly report (published on 18th April 2019), Nifty has been largely range bound between 11800 and 11550 range. In our last report, we had mentioned that 11550 is an important support for Nifty and till the time this support is not broken decisively and Nifty gives a weekly close below 11550, bulls will dominate the power tussle. Till now, bulls have managed to hold this support, however, they have yet not been able to clear major hurdle of 11900 levels.

The short and medium term trend for Nifty is sideways, it is trading between 11550 and11800 (a mere 250 points range move), since first week of April, a sideways consolidation of 5‐weeks. It continued to face resistance from the supply line of the “Up Sloping Trend Channels”, connecting the lows of 10004 and 10585 (See chart). The daily RSI continued to display negative divergence and trading below the support of 60 (currently @ 57). On daily charts, MACD is approaching towards 0‐line.

Now, 11550 has become a crucial support and till the time this level is not breached, despite having “Negative Divergence” on daily RSI and MACD slipping below 0‐line, Nifty will not have any bearish implications and it might trade sideways (between 11550 and 11800), as it did in the past. There are multiple resistances working in the range of 10800 and 10900 (shown in charts as extension levels of current move from the lows of 10585). A decisive break of 11900 will see the bulls once again taking full control and then Nifty should rally towards 12100+ levels.

Weekly Analysis

The above chart is weekly chart of Nifty since 2005 lows. In the above chart, we can see that weekly MACD has faced strong resistance around 480‐500 levels, but once these levels are broken decisively, Nifty rallies sharply towards news highs. In the past, there have been only three instances, when weekly MACD of Nifty has managed to give a close above 500 levels ‐ 2008, 2009 and 2014.

Coincidently, out of these three times, twice it has managed to register this MACD weekly breakout after the outcome of “General Elections” (once in 2009 and then in 2014). This time history will repeat itself? Only time will tell us. But, the weekly setup of Nifty suggests that we might see a repeat of 2009 & 2014 this year too.

However, for this bullish argument, it is important for Nifty to sustain above the 11550 levels on weekly closing price basis. A decisive breakdown of this support, will be the first sign of corrective decline in medium term and then Nifty could slide towards 11300 and 11150 (20‐week MA).

SHORT TERM VIEW (2‐4 weeks):

In the short term, we expect Nifty to rally towards 12100‐12200 zone, once 11900 levels are taken decisively.

Now, 11600‐11550 has become an important support for short‐term. Only a breach of this support zone will witness further sell‐off in Nifty and then it could slide towards its medium term support zone of 11300‐11150.

We advise short‐term trades to buy Nifty now and on any decline towards 11600 levels with a stop loss of 11550 (on weekly closing price). Our immediate upside target is 11900 while 12100+ will be a major hurdle for bulls to cross before the “General Election” results.

MEDIUM TERM VIEW (3‐6 Months):

We expect Nifty 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 and Nifty could then rally towards 13700 levels by the end of this year.

We advise Positional Trades to buy Nifty on all declines towards 11550‐11300 levels, for medium term price target of 13700. Our stop loss for all positional medium term longs is 11100 (On Monthly closing Price).

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Author: lfspms