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After conclusively breaking out of a key long-term resistance at 13,500 in early May, the Bank Nifty is now moving sideways around 15,000. The index was volatile and ended on a flat note last week.
On the other hand, the CNX IT Index extended its weekly close on a positive note in the midst of volatility, gaining 1.2 per cent, mainly supported by Friday’s 2.5 per cent surge. Last week’s choppiness was primarily due to the June month F&O expiry.
Bank Nifty (14,992.3)
A steady downtrend in the index came to a halt in early September 2013 around 8,625. Since then, Bank Nifty has been on an intermediate-term uptrend forming higher peaks and troughs. In May, the index decisively breached its key resistance and registered a new high of 15,742 in mid-May. It has since been on a sideways movement.
While moving sideways, the index breached its 21-day moving average and is testing support at 15,000. A negative divergence in the daily and weekly charts indicates that a trend reversal is on the cards. A strong fall below 14,985 can pull the index down to 14,500 in the short-term. Next key base is pegged at 14,000 levels; a strong weekly close below this level will pose a threat to the index. In that scenario, the index can decline to 13,000 levels in the short to medium-term. An upward reversal from the aforementioned supports can take the index northwards to 15,350 and then to 15,600 in the medium-term. A strong rally above 15,600 is needed to reinforce the bullish momentum and take the index higher to 16,000 levels. Key immediate supports are at 14,850 and 14,500. Resistances are pegged at 15,200 and 15,350.
As long as the index trades above 12,000 there won’t be any threat to the intermediate-term uptrend that has been in place from last September. But a break of this base level will have negative implications and drag the index down to 11,000 or even to 10,000 in the long-term.
CNX IT (9,819.9)
CNX IT index bottomed out in April 2013, much before the Bank Nifty, and began to trend upwards. It has been on a long-term uptrend since then. Nevertheless, marking a new high at 10,398 levels in March 2014, the index started to witness corrective decline. This decline found support at 8,670 and the index bounced up in May 2014, following a 38.2 per cent fibonacci retracement of the previous uptrend.
In early June, the index comfortably breached its key resistance as well as 200-day moving average at 9,200 levels and continued to trend higher. The index is now hovering well above its 50- and 200-day moving averages. Further, on Friday, the index jumped 2.5 per cent breaching an immediate resistance at 9,600, driven by gains in the large-cap IT stocks; namely, TCS, Wipro and HCL Technologies. The index can continue on its progressing uptrend and reach its next resistance at 10,000 in the coming weeks. A strong breakthrough of this level can take it higher to 10,400 in the medium-term. Conversely, a fall below its immediate support of 9,600 can pull it down to 9,400 or 9,200 in the short-term. A strong weekly close below 9,200 will strengthen the bearish momentum and drag the index down to 8,670 in the medium-term.
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