Nifty: Sell on rise

Nifty: Sell on rise

Market experienced one of the most volatile weeks and traded in a range of about 8 per cent during the week before closing flat for the week. Sensex...

Market experienced one of the most volatile weeks and traded in a range of about 8 per cent during the week before closing flat for the week. Sensex also closed with minor gains. In other words, Nifty did not fall after 5 weeks’ of fall and formed ‘hammer’ type of candle in the last two weeks, suggesting buying support at lower levels and possible reversal. However, there is strong resistance around 5555 and below major key moving averages, indicating selling too at higher levels and higher levels are unlikely to sustain, considering macro fundamental factors.

Indian rupee also swung wildly, but made a smart recovery from a low level of about 69 against $. GDP data released after market hours was not encouraging and market may react negatively to the muted growth. While some more pullback is possible, technically Nifty is close to strong resistance area of 5555, which if crossed convincingly could give a smart pullback with resistance around 50DMA /200DMA which are placed around 5750 / 5800. However, macro fundamentals are indicating further deterioration and any pullback / recovery could only be short lived and further lows too cannot be ruled out. Nifty had entered medium / long term bearishness.

However, fundamentally, Nifty is quoting below its long term average PE and any further fall could make it attractive from long term point of view. So, the present divergence between fundamentals and technicals could prevail for some time before they converge. Nifty is bearish for medium and long term as long as it trades below 200 DMA. Short term uptrend would be confirmed on one more positive close with stiff resistance around 5555/5700. Nifty had oscillated in a narrow zone of 750 points (6240 to 5480) till July and presently the range is widened to about 1100 points with last month’s fall and has potential for the range to get further widened to more than 1200 points by year end. Hence, sell on smart rally as long as it is below 200 DMA. For the coming week, Nifty spot is expected to face resistance at 5555, 5625, 5700 and find support at 5400, 5325, 5250. Close above 5500 would reinforce short term bullishness and a close below 5300 would make it bearish once again.

Advice for Traders
Nifty had a wild swing last week and closed at the upper end of the week indicating further rise. However, strong resistance is seen around 5555. Unless rupee improves vastly, which is unlikely, market can seek lower levels in September. Hence, better to ‘Sell on Rise’ considering macro fundamental and medium- term technicals.
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