Nifty: Caution at higher levels

Nifty: Caution at higher levels

In tune with expectations, market gained under 4 per cent as bank stocks gained smartly to New RBI...

In tune with expectations, market gained under 4 per cent as bank stocks gained smartly to New RBI Governor’s measures and INR too gained strength. (It was mentioned earlier in this column that market could turn positive, as the new RBI Governor expected to bring harmony between RBI and govt and with the liberal policies). As Bank stocks were beaten, they rebound swiftly on the announcement of reform measures.

Structural changes are needed in the long term interest. As Sensex gained for the second week, a gain for one more week is possible but higher levels may not sustain.
Technically, a double hammer in weekly chart had its impact as Nifty rallied smartly considering the prevailing pessimism. Since Nifty is trading above the key resistance level of 5555, it would continue to be bullish as long as the level holds and short term bearishness would once again set in when Nifty closes below 5555 for couple of days. 50 and 200 DMA also act as major resistance. Technically, INR has limited scope for appreciation and when it starts becoming weak, a new low 69/70 too cannot be ruled out technically. Hence, be watchful about USD INR movement. FIIs too might not enter market in a big way unless currency situation improves. And being a pre-election year populist policies would be viewed negatively by market. Nifty is bearish for medium and long term as long as it trades below 200 DMA. Short term downtrend would be confirmed on one more closes below 5550. Hence, sell on smart rally as long as it is below 200 DMA or below 5550 level.
For the coming week, Nifty spot is expected to face resistance at 5760, 5840, 5915 and find support at 5600, 5520, 5440. Nifty presently in Short term bullish would get into short term bearishness only if it closes below 5550.
Advice for Traders
Nifty has rallied smartly from the recent low levels and close to 50/200DMA. Risky traders can consider short positions close to 5800 with a call option as hedge and traders with low risk appetite can consider short positions only when it closes below 5550. Alternatively, long positions too can be tried on decline with a stop and reverse below 5550.
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