NIFTY Outlook: Where is the tricky index headed?

NIFTY Daily Chart Technical Analysis:

As the chart predicted last month (see my previous on NIFTY), 5500 has been an important level throughout May and June.  The index remained around this level initially and then fell to the 5200 level.

Why is 5200 important?  

The market has reached this level for the 3rd time since July 2010 (almost an year ago).  Last time was in Feb 2011, when the market dipped below 5200 briefly but rallied back upwards. This time again, the market has reached 5200 and has now shown signs of support.

Two more patterns have emerged.

The first is another important support at 5350.  Remaining above this level is a good sign as you can see in the chart.  While 5200 has served as a bottom, 5350 has served as the stronger support level over the past year.

Another is the diagonal set of parallel lines of support and resistance for the short term period since May 2011.  The line of support passes through 5200 just where the market dipped to this level in the current week.  This makes 5200 a very important level in the current week and that the market has shown support and remained above 5200 is a good sign.

Moreover, the volume has consistently lowered throughout the year and the current weekly volumes are atleast 50% or less as compared to a year ago.  The volume has progressively fallen.  This is showing a lowered interest in the market at the current rates.  This could be a sign that the market is readying for a move soon.  

For the time being it does seem like the market will rebound towards the higher levels after sputtering to a bottom of 5200.  But in the longer term, it is still doubtful if the market will be able to sustain above this level considering the socio-economic and political situation in India.  Defer from making long term decisions right now and trade for the shorter term, and beware of any fall below 5200 as this is an important support level.

All posts related to NIFTY

NIFTY Daily Chart Technical Analysis