Technical Analysis

Nifty needs clear move beyond 15K to strengthen bullish momentum

Yoganand D BL Research Bureau | Updated on May 08, 2021

If the key resistance limits the rally, the index can be range-bound between 14,500 and 15,000 for some time

The volatility in the local equity market is likely to continue in the ensuing truncated week as exchanges are closed on Thursday on account of Id-Ul-Fitr. Lockdown in many States due to second wave of Covid-19 can slow down economic activity and can keep the indices volatile.

On the global front, the focus will be on the market reaction to the weak US April jobs report (released after Indian market close on Friday), and the consumer price index and US Retail sales to be released in the coming week.

Nifty 50 (14,823.1)

The Nifty 50 advanced 192 points or 1.3 per cent in the midst of volatility in the week. After an initial decline, the index largely took support at around 14,500 and bounced up.

The week ahead: Last week, the declines were arrested mainly at around 14,500 and the Nifty 50 trended upwards in the past three trading sessions. The index has surpassed the 21- and 50-day moving average and marginally trades above these moving averages. Immediate support is placed at 14,600 and next is at ₹14,500. Nearest resistance is at 14,870 and a decisive rally above this level can take the index higher to 15,000.

We reaffirm that a conclusive break-out of 15,000 will alter the downtrend that has been in place from the February high of 15,431. Such a break will strengthen the bullish momentum and take it higher to 15,200 and 15,400 levels over the short term.

The relative strength index on the daily chart continues to feature in the neutral region and the weekly RSI has entered the bullish zone from the neutral region. Moreover, the daily price rate of change indicator hovers in the positive terrain, signifying buying interest. If the key resistance at 15,000 limits the rally, the index can be range-bound between 14,500 and 15,000 for some time.

On the other hand, a slump below the immediate base level of 14,600 can drag the index lower to the next crucial support at 14,500. An emphatic break below this base will drag the index down to 14,250 and 14,000 levels over the short term. That said, a decisive plunge below 14,000 will reinforce the downtrend and pull the index down to the following key support that is in the range of 13,500-13,600. Supports thereafter are at 13,330 and 13,000 levels.

Medium-term outlook: There is no major change in the medium-term trend, which continues to be up for the index. The medium-term trend has been up since the December 2020 low of 13,131 levels and it will remain intact as long as the index trades above 14,000 levels. An emphatic breakthrough of the vital resistance at 15,000 is needed to reinforce the bullishness. In that case, the index can trend higher to 15,200. A clear breach of this hurdle can pave the way for an up-move to 15,500 and then to 15,600 in the medium term.

The intermediate-term uptrend will remain intact as long as the index trades above the vital base level of 12,750. A decisive slump below this base can alter the uptrend and drag the index lower to the supports at 12,400, 12,260 and 12,000 over the medium term. Significant supports below 14,000 are pegged in the 13,500-13,600 band and 13,000.

Sensex (49,206.4)

The Sensex continued to trend upwards and has climbed 424 points or 0.87 per cent in the past week. Last week, the initial decline was halted by the key support at 48,000. The key support in the band between 47,700 and 48,000 is a crucial level to pay attention to. On the upside, the vital short-term resistance is at 50,000, the psychological level to note.

A clear break-out of this level is needed to reinforce the medium term uptrend that has been in place from December 2020 and take the index higher to 51,000 in the coming trading sessions. In that scenario, the downtrend that commenced from the February high of 52,516 will be altered and take the index higher to the next resistances at 51,400 and 52,000. A further breakthrough of resistance at 52,000 is required to underpin the uptrend and accelerate the index to 53,000 and then to 54,000 over the medium term.

Conversely, if the index fails to move beyond the immediate resistance level of 50,000, it can keep consolidating in a sideways range between 47,700 and 50,000 for some time. A plunge below 47,700 will bring back selling pressure and drag the index lower to 47,000 and then to 46,000 over the short to medium term. Next supports are at 45,000; 44,520 and 44,000. Investors with a long-term perspective can stay invested with a stop-loss at 40,000.

Nifty Bank (32,904.5)

Last week, the Nifty Bank index largely traded in the band between 32,000 and 33,000 and has advanced marginally by 122 points or 0.37 per cent. The index tests resistance at 33,000. A rally above this level will strengthen the bullish momentum and pave the way for an up-move to 33,500 and then to 34,000 levels. Traders with a short-term view and high risk appetite can go long above 33,000 levels with a fixed stop-loss.

A break-out of 34,000 will alter the short-term downtrend in place since the February high of 37,708.7 and bring back bullish momentum. Such an up-move can take the index northwards to 34,800-35,000. Resistances thereafter are placed at 36,000; 36,500 and 37,000. As long as the index trades above 29,000, the intermediate-term uptrend that has been in place from the September 2020 low of 20,400 will remain in place. Next supports are at 28,500 and 28,000.

That said, the inability to move beyond 33,000 decisively can drag the index lower to the immediate support level of 32,500 and then to 32,000 once again. Both the daily and the weekly relative strength indices are featuring in the neutral region. Downward break of support at 32,000 can witness selling interest and pull the index lower to 31,000 and then to 30,000. Subsequent supports are at 29,000 and 28,000 levels.

Published on May 08, 2021

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