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B. Krishnakumar

NIFTY (1698.9)

Preferred view: The index moved right in line with previous week's expectations. As anticipated, Nifty recovered ground after a brief correction on Monday. Though the expected short-term weakness turned out to be short-lived, the index recovered ground as expected last week. The short-term outlook remains positive. The index has managed to move past the earlier high of 1684. This could result in a rally to the next target zone of 1725-1730. At the moment, only a drop below 1610 would negate the short-term positive outlook.

Comment: The index ruled firm and managed to close above the positive trigger level of 1688. This confirms the short-term positive outlook. However, the Nifty appears to be heading towards the final stages of the rally that has lasted for over seven months now. This view is also supported by the waning momentum behind the recent legs of the rally.

Besides, the series of negative divergence between indicators and daily price movement is a worrying factor. The recent pattern in the 14-day RSI is another cause of concern. This indicator has reversed from the 70 level on a couple of occasions even though the index had registered higher highs.

The inability of the index to move past the 70 level when the index is supposed to be in an uptrend indicates lack of momentum behind successive upmoves. The occurrence of multiple negative divergences in the weekly chart is also an indicator of an impending correction.

Alternative view: Though a short-term uptrend is the preferred view, a close below 1610 would negate the positive outlook. A close below this level could pave the way for a drop to the 1500-1510 range thereafter.

SENSEX (5315.8)

Preferred view: The index ruled firm and managed to move past the bullish trigger level of 5300. As a result, the short-term trend has turned positive. The Sensex is likely to move to the 5400-5450 range in the near term. The view would remain valid as long as the index stays above 5040.

Comments: After a subdued trend on Monday, the Sensex managed to recover sharply on Tuesday. The trend remained lacklustre in the remaining three days of the week. The formation of a series of "Doji" pattern in the Japanese Candlestick chart is a cause of concern. This pattern indicates indecisiveness. A close above Friday's high of 5344 is critical for the sustenance of the current uptrend.

Alternative view: The close above 5300 has imparted short-tem strength. As mentioned last week, this is likely to push the index to the next target of the 5400-5450 range. Only a drop below 5040 would negate this view and this could lead to a slide to the next support at the 4880-4900 range.

S&P CNX 500 (1381.6)

Preferred view: The movement in the index was not quite in line with last week's expectations. Contrary to the bearish outlook, it ruled firm and managed to move past the earlier pivot high of 1352.65. There appears to be limited upside potential from current levels. A move to the 1410-1420 range appears likely. However, the breach of 1325 could lead to a drop to the next support level of the 1270-1275 range.

Comments: Quite a few mid-cap stocks staged a sharp upmove last week. The likes of Agro Dutch Foods, Alok Industries, Bayer ABS, IVRCL Infrastructure and Nicholas Piramal managed to seek higher levels. This, in turn, had a positive impact on the index. The positive outlook for quite a few mid-cap stocks indicates that the index could seek higher levels.

CNX IT (21698.8)

Preferred view: In contrast to last week's view, the index ruled firm. It also managed to move past the resistance level of 21300 that was mentioned last week. As a result, the near-term outlook has turned positive and a move to the 22500-22600 range appears likely. Only a drop below 19850 would negate the positive outlook.

(Note: The analysis and opinion expressed in these columns are based on the technical analysis of the past price behaviour. Analysis and price targets are based on the Elliott Wave Analysis. There is a risk of loss in trading)

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