Nifty bias is still upwards; but volatility will be a risk too

Special to Firstpost

S&P CNX Nifty (5,139.05): The Nifty index ruled firm, in line with the previous week’s expectations. The short-term outlook remains bullish and a rally to the immediate resistance at 5,250 is the preferred view. The positive outlook would be under threat only if the index falls below the support level of 4,940.

As highlighted in the daily chart of the Nifty, the blue set of trendlines carry frequency and have acted as support/resistance. The breakout past the upper blue parallel line is a positive sign. It is also interesting to note that the fall on Thursday was arrested right at this trendline, confirming its validity.

The target based on this blue trend channel works out to 5,350. Considering that we are headed towards a news-heavy period, it would make sense to reduce the trading bet-size as volatility is likely to perk up.

As always, stick to the trades that offer a better risk-reward ratio and, more importantly, staying on the sidelines and doing nothing until news flow subsides is a viable option too.

CNX Bank Index (10,064.80): Except for a blip on Thursday, the index ruled firm during the week gone by. As observed the previous week, the short-term outlook is bullish and a rally to 10,800 is on the cards.

The positive outlook would be invalidated if the index falls below the bearish trigger level of 9,650. Individual stocks such as Rural Electrification Corporation, IDFC and Punjab National Bank rank high in the list of bullish candidates.

USD/INR (Rs 55.69): This currency pair did a whole lot of nothing during the just concluded week. The US dollar has been confined to a narrow trading range and there is a perceptible drop in volatility as well. This is normally a precursor to a big move, triggered by an expansion in volatility.

The resistance at Rs 56.30 is the level that the bullish camp would be interested in while the bearish forces might get the upper hand if the dollar falls below Rs 54.70. In this kind of a scenario, it would be better to wait for this range-bound action to resolve itself and take a fresh call thereafter.

Grasim Industries (Rs 2,485.80): This stock was amongst the top gainers on Friday. Along with Grasim, a host of other stocks from the cement sector attracted buying interest during Friday’s trading session. A look at the daily chart indicates that the stock has bounced off crucial support and appears headed to the resistance at Rs 2,770.

Long positions may be considered with a stop-loss at Rs 2,300 for a target of Rs 2,770. A breakout past this initial target would trigger a rally to the major resistance at Rs 2,900.

(The views and recommendations featured in this column are based on a 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.)