Despite bearish performance, Nifty outlook is bullish this week

by Special to Firstpost

CNX Nifty (6,140.75): The market sentiment was bearish during the week gone by and the Nifty closed in the red on all trading sessions of the week. The fall was triggered by a slide in the banking sector. The public sector banks took a knock which played a key role in keeping the frontline indices in the red.

Technically, the outlook for the Nifty remains bullish. From a medium-term perspective, only a breach of the swing low at 5,700 would damage the bullish set-up. From a short-term perspective, a fall below minor support at 6,078 would be a sign that the index is in the midst of a deeper downward correction.

Below 6,078, the Nifty could slide to the major support at 5,750-5,800. From a trading perspective, short positions may be considered with a stop loss above the recent high, for a target of 5,800. Those willing to play the waiting game may consider long positions closer the 5,700 range for a rally to new highs.

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CNX Bank Index (10,913.15): This index played a key role in pulling the frontline indices to lower levels this week. The prior gap at 11,470-11,600 range acted as a strong resistance and arrested the recovery process witnessed in the previous week.

We are headed into a news heavy week with State Bank of India announcing its earnings on 13 November. The performance of SBI along with the key data release would have a big influence on the bank index.

Technically, the index on Friday slipped below the upsloping trendline, which is a sign of weakness. The short-term outlook for the index is bearish and a slide to 9,950-10,100 appears likely. The bearish view would be in force as long as the recent high of 11,736 is not breached.

Divi’s Lab (Rs.1,020.10): After a prolonged downward correction, the price action in the past few weeks indicate that the stock has resumed its medium-term uptrend. The short-term outlook is positive and a rally to Rs.1,190 appears likely.

Investors may buy the stock at the current levels as well as on declines, with a stop loss at Rs.980 and target of Rs.1,190. A breakout past Rs.1,200 would lend further momentum to the uptrend and the stock could then test the major resistance at Rs.1,270

Mahindra & Mahindra Financial Services (Rs.295.20): After a sharp upside breakout on Oct.29, the stock got into a consolidation mode. The bullish “key reversal day” pattern on Friday suggests that the stock is getting ready for the next leg of the uptrend.

Long position may be considered with a stop loss at Rs.277 and target of Rs.325. Those having the patience to hold for longer term may get exit opportunities at Rs.360 and beyond.

(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.)