Technical Analysis

Index Outlook: Nifty ready to cross 15,800 barrier this week

Yoganand D BL Research Bureau | Updated on July 03, 2021

Near-term supports are at 15,635 and 15,500, which could buttress the index if corrective decline occurs

With the benchmark indices Sensex and the Nifty 50 remaining range-bound and with selling pressure witnessed at higher levels, investors should remain cautious in the ensuing weeks.

The volatility index – India VIX, which has tumbled 9.5 per cent in the past week to close at 12, which is oversold level. Also, the weakening rupee against the greenback and increasing crude oil price need to be monitored.

On the global front, the US FOMC minutes and movement of the Dow Jones will lend direction to the global equities.

Nifty 50 (15,722.2)

Following a positive start at 15,915 which is the intra-week high, the Nifty 50 index began to decline and finished the week in negative territory, declining 138 points or 0.87 per cent. The index continues to test the resistance at 15,800 levels.

The week ahead: Since early June this year, the index has been in a short-term sideways movement largely in the band between 15,600 and 15,850 levels. Near-term supports are at 15,635 and 15,500, which could buttress the index if corrective decline occurs. A clear slump below the vital base level of 15,500 can begin weakening the uptrend that commenced from the April low of 14,151. In that case, the corrective down-move can extend and test subsequent supports at 15,300 and 15,000 levels.

We reiterate that the uptrend that has been in place since the late April low at 14,151 will be intact as long as the index trades above the 14,800 base level. A strong fall below 14,800 will weaken the uptrend and pull the index down to the next supports at 14,500 and then at 14,200. Supports thereafter are at 14,000 and in the 13,500-13,600 band.

Conversely, if the index exceeds 15,800 levels then it can test the key resistance at 16,000 in the near term and a further rally beyond this level can take it higher to 16,200 initially. An up-move to 16,500 levels is likely in case the index sustains above 16,000 levels.

Medium-term outlook: With the minor decline in the past week, there is no major change in the medium-term stance. The medium-term trend has been up since the December 2020 low of 13,131. Over the past one month the index has been in a sideways movement with the primary uptrend. We restate that the medium-term uptrend stays intact as long as the index trades above the dynamic support of 14,000. Key medium-term supports are placed at 15,500 and 15,000 that could provide support in case of corrective decline. The index needs to decisively decline below 14,000 to mar the medium term uptrend and drag it lower to the 13,500-13,600 band and then to 13,000 levels over the medium term.

On the upside, if the index breaks above the vital barrier at 16,000, it will reinforce the uptrend and pave the way for an up-move to 16,500 levels over the medium term.

Sensex (52,484.67)

After testing resistance at 53,000, the Sensex fell 440 points or 0.8 per cent in the previous week. It has been in a sideways movement broadly in the band between 51,700 and 53,000 levels. Within this band, the index now tests support at 52,500 and the next crucial base is at 52,000.

The index continues to test the psychological resistance at 53,000. An emphatic breakthrough of this level will pave the way for an up-move to 53,500 and then to 54,000 levels in the coming weeks.

If the index tumbles below 52,000 levels, it will start weakening the short-term uptrend and pull the index lower to the next base level of 51,400 and then to 51,000 levels over the short term.

As long as the index trades above the 50,000-mark, the short to medium-term uptrend that started from the April low at around 47,204 will stay in place. A decisive fall below 50,000 will start threatening the uptrend and pull the index down to the next supports at 49,000 and then to the 47,700-48,000 band. Investors with a long-term horizon can remain invested with a long-term stop-loss at 41,000.

Nifty Bank (34,809.9)

The Nifty Bank index has fallen 554 points or 1.57 per cent in the past week after encountering resistance at 35,500 levels. The index has a key resistance in the band between 35,500 and 35,650 levels. On the other hand, the support at 34,500 is providing base for the index. A conclusive fall below this base will bring back selling pressure and drag the index down to 34,000 over the short term. A further fall below 34,000 levels will start weakening the uptrend that commenced from the April low at around 30,405 levels and drag the index lower to 33,500 and 33,000 levels. Supports below 33,000 are pegged at 32,000 and 31,000 levels.

On other hand, if the index surpasses the vital level of 35,000 it can trend upwards and test the resistance in the band between 35,500 and 35,650.

A conclusive break above this level can pave the way for an up-move to 36,000 and then to 36,500 levels over the short term. Traders should tread with caution as long as the index trades below 35,000 levels.

Published on July 03, 2021

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