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Nifty (11823) - Sideways Consolidation Underway, Major support Zone 11550-11600

After a sharp upmove in last week of May 2019 (from 11400 to 12000 levels), Nifty is currently in consolidation phase between 11700 and 12100. In our last fortnightly report, we had mentioned that 11900-12100 range is crucial resistance zone for Nifty and a decisive breakout above 12100 will see Nifty adding couple of hundred points on the upside before any major profit taking comes.

During the first week of fortnight, Nifty opened higher and rallied to a high of 12103. However, profit taking at higher levels, after the RBI monetary policy was announced (RBI eased rates by 25 pbs), again pushed it back below 12000 levels and Nifty tested a low of 11769, before ending @ 11823. Since last three weeks, Nifty is consolidating in a narrow range of 350 points between 11750 and 12100, forming a base for next major rally beyond 12100 levels. A decisive breakout beyond 12100-11200 levels will set stage for a pre-budget rally towards 12500+ levels.

On the downside, now immediate support for Nifty is placed around 11780 and 11750. A breach of this support range will cause some short term selloff in Nifty and then it could slide towards its major support zone of 11680 (50 -day SMA) and 11650. Only a decisive breach of 11650 levels will accelerate the fall and then it could slip further lower towards 11400 levels, to close the “Gap” area between 11420 and 11580. The “demand line” support of up sloping trend channel (Blue Channel) is also placed around 11400 levels.

Weekly Analysis

On the weekly charts, there are some negative developments, weekly RSI is showing negative divergence and weekly MACD has also given a bearish crossover. Indicating some price weakness in Nifty in the coming sessions. However, this same structure of RSI and MACD was witnessed between March 2017 and Feb 2018 but Nifty did not witness any big price damage for a very long time.

In the chart given below we can see that, in spite of having negative divergence on weekly RSI and a bearish crossover on weekly MACD, the Nifty continued to rally higher and got good support from the 20 week SMA. In the coming weeks, till the time Nifty is trading above the 20 week SMA, there is no threat for the medium term uptrend for Nifty. The 20 week SMA is currently placed at 11421, which is very close to the highs made just before the “Exit-poll” and “General Elections” results were announced (@11424).

In such a scenario now, 11420-11400 has emerged as an Important support for Nifty in case of any deep cuts below 11650 levels and till the time Nifty does not gives a weekly close below 11400, the current rally will remain in force and Nifty will continue to scale higher highs in coming months


Nifty is currently trading near the major supply zone of 12000-12100. On the downside, 11600-11550 has now emerged as 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 12000-12100 zone.

MEDIUM TERM VIEW(3 -6 Months):

We continue to remain bullish for the medium term on Nifty and expect it to rally higher in coming months. On Upside, 12000-12100 is major supply zone for Nifty and once this supply is absorbed, we will witness a sharp rally in markets initially towards 12500+ levels and then finally towards 13100+ levels by the end of this year.

We advise Positional Trades to hold/accumulate Nifty between 11750 and 11600 zones, for medium term price target of 12500+ and then finally 13100+ by the end of the year. 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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