Nifty

Indian markets are taking breather after a 40% up move in last year. In my previous update on Nifty given on 11^th 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. Once Nifty breaks below 8100 level the next support for nifty is in the range of 7700. 

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.