By- Vinay Rajani, Technical Analyst, HDFC securities.
After one week of profit booking, Nifty resumed its uptrend by surging more than 3% this week. IT and financial services sectors outperformed, while metal and commodities underperformed the Nifty. Midcap and small cap also continued to underperform by limiting their gains to 0.9% and 0.10% respectively. Nifty has been rising for last 5 consecutive sessions, which resulted in the gain of more than 350 points.
Nifty surpassed the crucial resistance of its 200 DMA this week. Previous top placed at 10,775 on the Nifty daily chart has also been taken out on closing basis. Higher top and higher bottom formation is well intact on the Nifty daily chart. At 10,882, Nifty has completed the 50% Fibonacci retracement of the entire fall seen from 11,760 (All time high made in August 2018) and 10,004 (Bottom of October 2018). Now next target for the Nifty is seen at 11,089, which happens to be 61.8% retracement level.
Also read: Legendary investor Jack Bogle sounds alarm on index funds, what he said
Oscillators and indicators have also been showing strength on the daily charts. RSI has been moving up, reached at 62 levels, which is still at a fair distance from the overbought zone. MACD has also reached above its signal line and equilibrium line.
Support for the Nifty is now shifted upward to 10,700-10,775 range. It would be advisable to remain long in Nifty for the upside target of 11,089, keeping SL at 10,700 on closing basis. As far as Bank Nifty is concerned, it has retraced more than 61.8% of the entire fall seen from 28,388 (August 2018 top) to 24,240 (October 2018 bottom).
This development negates the chances of resuming downtrend, which initially started in August 2018. Next resistances are seen at 27,150 and 27,410 in Bank Nifty. Support is shifted upwards to 26,380 in spot market. Going forward, we see an opportunity in auto sector, where momentum buying could emerge. Two-wheeler companies are expected to outperform in coming days.
Disclaimer: Views expressed are the author’s own