Indian markets are taking breather after a 40% up move in
last year. In my previous update on Nifty given on 11th
January 2015, I wrote the following, “Nifty
is trading at significant resistance and may correct from current levels before
it breaks upward.”
Indian markets have mostly
moved sideways in last four months and formed a head and shoulder reversal
pattern. If we look at the daily chart of nifty we can see that Nifty is
currently trading at a very crucial support of 8100 - 8150 levels.
If
we look at the weekly chart of nifty we can see that made a top exactly at the
upper end of the channel. Since Nifty had not been able to break above the channel most likely
it will correct toward the lower end of the channel. Hence I expect Nifty to
correct up to 7700 levels before we see any meaningful upside.
If
we see the larger pattern on Nifty in the monthly chart we can see that Nifty
took resistance at the parallel channel, and pulled back from there. The resistance
for nifty is firmly established at 9000 while the support of the long term
trend line is at around 7000.
If
nifty breaks above the resistance it will see a very rapid up move of 30% – 50%.
Which I don’t think is possible in current scenario. Hence my best case
assumption is that nifty will move in the range of 7000 - 9000 for atleast 6 –
12 months or more before breaking out on the upside.
If
market corrects and falls below 7500 (I think there is good probability of this
happening) it will be a golden opportunity to accumulate
good stocks for long term investments.
Summary
1.
The upside in
Nifty is limited to 9000
2.
The downside in
Nifty is limited to 7000
3.
Nifty have a
support of 8100 – 7700 – 7000
4.
Nifty will spend
6 – 12 months or more in this range.
5.
Long term trend
of nifty stays up.
6.
If nifty breaks
below 7500 it will be a great buying opportunity.
