The Hindu Business Line : Nifty packs momentum but correction likely

The index ruled strong and moved past the first resistance zone at the 2460-2470 range. This helped the index move to the next target zone of 2530-2550 that was mentioned last week.

Taking into account the recent uptrend, there is a case for a short-term correction setting in shortly.

From a longer-term perspective, the momentum behind the recent rally indicates that the upward move from the low 2307 could be the first leg of a fresh bullish trend.

The move past the 61.8 per cent Fibonacci retracement of the drop from 2670 to 2307 has compelled us to turn bullish.

We had outlined two possibilities last week. The move past the 61.8 per cent retracement has made us attach greater degree of weightage to the view of the resumption of the long-term uptrend. This has effectively negated the earlier view of another round of decline towards the low at 2307.

The long-term positive view would in force as long as the index holds above 2400. A close below 2400 would bring into play the other possibility of a retest or a drop below 2307.

Comments: The sustained upward move took everyone by surprise. More than the positive sentiment, the strong momentum behind the rally was particularly impressive.

This kind of a market action is not normally associated with a corrective rally. The index appears on course to move to the next target zone of the 2670-2680 range.

This view would be validated if the index manages to move past the immediate resistance at 2570. Long-term investors may continue to hold with a stop-loss at 2470. Investors with a higher risk tolerance may settle for a stop-loss at 2400.

SENSEX (8471)

A positive sentiment prevailed as expected last week. The index moved comfortably past the resistance zone of 8250-8280 range, which set the bullish tone for the week. The outlook is positive and a move to 8850-8860 range appears likely. The positive view would be in force as long as the index holds above 8200. An encouraging outlook for quite a few index heavyweights confirms the positive outlook for the Sensex.

CNX IT (3461)

The outlook for this index, too, appears positive. A move to 3700-3750 range appears likely. Stop-loss for long positions may be placed at 3340.

A close below this level would negate the positive outlook and would warrant closure of long positions. Short-term traders may consider long positions on dips, with a stop-loss at 3340.

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