S&P CNX Nifty (5,278.90): After an extended period of range-bound action, the index finally registered an emphatic breakout on Friday. The gap-up opening was followed by further consolidation of gains. This is a sign of strength and in the process, the Nifty has moved closer to the target of 5,350 mentioned in prior weeks.
As highlighted in the chart, the blue line has acted as a line of balance. The price took support at this line and has bounced smartly thereafter. Simple channel measurement projects a target of 5,450. It would be prudent to discuss about higher targets once the Nifty conquers the immediate hurdle at 5,350.
It is positive to note that the trend in the index heavyweights such as SBI" target="_blank" title="State Bank of India">State Bank of India, Larsen & Toubro and ICICI Bank are supportive of the continuation of the rally in the Nifty. The bullish view would be intact as long as the index trades above the bearish trigger level of 5,050. (Click here for chart)
CNX Bank Index (10,340.65): This index played a key role in propping up the Nifty on Friday. The rally Friday has pushed the index closer to the target of 10,600 mentioned in the earlier weeks. The short-term outlook remains bullish and a rally to the major resistance at 10,880.
The bullish view would be invalidated on a close below the support level of 9,600. Long position may be considered on weakness, with a stop loss at 9,600, basis the spot price. Individual stocks such as IDFC, Bank of Baroda, ICICI Bank and SBI too appear promising from a trading perspective.
USD / INR (Rs 55.75): The sharp rally in the equity markets had a positive rub-off on the Indian rupee. The US Dollar cracked sharply on Friday and the ferocity indicates that the slide might extend up to the immediate support at Rs.54.75-54.80.
The US dollar has to fall below the major support at Rs.54.50 to even entertain thoughts of a reversal of the uptrend. Until Rs.54.50 breaks, it would be reasonable to expect a test of the Rs.58-mark. (Click here for chart)
Rural Electrification Corporation (Rs 191.80): After a downward correction since Feb.17, the stock resumed its uptrend since May 6. The short-term outlook is positive and a rally to the immediate resistance at Rs 217 appears likely.
Investors may use price weakness to buy the stock with a stop loss at Rs 173. A breakout past Rs 217 would lend momentum to the rally and the stock could then hit the next resistance at Rs 228. (Click here for chart)
(The views and recommendations featured in this column are based on the technical analysis of historical price action. There is a risk of loss in trading. The author may have positions and trading interest in the instruments featured in the column.)