Nifty is two minds: but medium-term is still bullish

Special to Firstpost

S&P CNX Nifty (5,664.30): The range-bound action continues and the Nifty index is still struggling to make headway in either direction. As observed last week, the next move in the Nifty would be influenced by the direction of the breakout from the present range of 5,620-5,730.

A fall below 5,600 would indicate that the index is headed towards the next support at 5,450 while a breakout past 5,730 would indicate that the rally towards the 6,000-mark is underway.

While the Nifty is still range-bound from a short-term perspective, the medium-term outlook remains bullish. Even if the index cracks 5,600 and heads to 5,450, it would not affect the medium-term bullish view.

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[caption id=“attachment_504729” align=“alignleft” width=“380”]  Even if the index cracks 5,600 and heads to 5,450, it would not affect the medium-term bullish view.[/caption]

As highlighted in the earlier weeks, the index has to fall below 5,215 to indicate a reversal of the bullish view. Positional traders may use any weakness to accumulate fundamentally sound stocks from the high-beta sectors such as banking, realty and infrastructure sectors.

CNX Bank Index (11,509.15): This index, too, did a whole lot of nothing during the just concluded week. Though the price pattern in the bank index is relatively bullish in comparison to the Nifty, the index is still range-bound. A breakout past 11,650 is a sign of strength while a fall below 11,300 would have bearish implications.

Rather than second-guessing the direction of the breakout, it would be advisable to wait for the price to give a lead. The fall below 11,300 would trigger a short-term downtrend that could push the index down to the major support at 10,700-10,800 range. A move past

11,650 would trigger a rally to 12,200-12,300.

Sundaram Finance (Rs 890.20): This stock has been in a steady uptrend in recent months. After a minor consolidation in the past few weeks, the price action on Friday suggests that the stock has registered a breakout above the consolidation. The short-term outlook has turned bullish and the stock could rally to the next resistance at Rs 970.

Investors may buy the stock on weakness, with a stop-loss at Rs 820, for a target of Rs 970. The uptrend would gain further momentum above Rs 970 and the stock could then rally to the next resistance at Rs 1,050..

Mahindra & Mahindra (Rs 879.60): The stock has been in an uptrend in the past few weeks. The sharp rally in the last couple of trading sessions indicates that the next leg of the rally is underway.

[caption id=“attachment_504727” align=“alignleft” width=“600”]  The sharp rally in the last couple of trading sessions indicates that the next leg of the rally is underway.[/caption]

Price weakness may be used to buy the stock with a stop-loss at Rs 810, for a target of Rs 990.

(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.)