Friday's market fall means Nifty bullishness is unreliable

Special to Firstpost

CNX Nifty (6,012.10): Though the Nifty gained about 2.8 percent week on week, the price action during the week was marked by heightened volatility. The index cleared the swing high of 6,093 on Thursday. The quick snap back on Friday raises concerns about the reliability of the breakout.

The bullish sequence of higher highs and higher lows off the recent low of 5,115 is still intact. This is a sign that the positive undertone is still intact. A fall below the recent consolidation of 5,790 would be an early sign of weakness. Until 5,790 is breached, it would make sense to lean on the bullish side.

A fall below 5,790 would be a sign that the high made this week would be a major hurdle for some time to come. Below 5,790, the Nifty could slide to 5,250-5,300 with relative ease.

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[caption id=“attachment_1058153” align=“alignleft” width=“380”]  Nifty[/caption]

Bank Index (10,686.50): The index ruled firm and also hit the target zone of 10,850-11,000 mentioned last week. It, however, reversed sharply post the disappointment from the RBI’s policy measures on Friday. The short-term trend would be contingent on what the index does in the following weeks.

The key reference levels are 11,300 on the upside which is likely to act as resistance and 10,300 on the downside which is the support level. A move past either of these reference levels would set the direction for the next move.

Above 11,300, the index could rally to 11,900-12,000 while a fall below 10,300 could lead to slide to 9,500-9,600 range. As always, it makes sense to let the price play its cards rather than second guessing the direction of the breakout.

Tata Steel (Rs 300): This stock has been one of the top performers in the past few weeks. The recent rally has pushed the stock to a key resistance area at Rs 318-320 range. The failure to clear this resistance is a sign of weakness and the stock could now slide to the immediate support at Rs 265-270 range.

[caption id=“attachment_1124541” align=“aligncenter” width=“600”]  Tata Steel[/caption]

Aggressive traders may consider short position at or above Rs.308, with a stop loss at Rs 321 and target of Rs 270. A fall below Rs 265 could lead to a test of the major support at Rs 235-240.

Colgate Palmolive (Rs 1,293.05): After a major downtrend, the stock has been in a consolidation mode in the last few weeks. The price action over the past few days suggests that the next leg of the uptrend is underway.

Long positions may be considered in the stock with a stop loss at Rs 1,190 and target of Rs 1,650. Price weakness may be used to build long positions in the stock. The uptrend would gain momentum beyond Rs 1,650 and the stock could then rally to Rs 1,850.

(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.)