Nifty above 5900: Can it sail past crucial resistance zone?

Special to Firstpost

CNX Nifty (5,945.70): The price action in the Nifty was in sync with expectations. The index staged a recovery and also sailed past the initial target of 5,840-5,860 mentioned last week. The Nifty is now positioned right at the crucial resistance zone at 5,940-5,970 range.

It remains to be seen if the index would stage an emphatic breakout past this crucial resistance zone. As always, it makes sense to wait for the price action to take the lead and give us a clue about the next major move. A move past 5,970 would be a sign of strength and could push the index to the target of 6,100.

On the other hand, a failure to get past 5,970, followed by a breach of the minor support at 5,850 would suggest that the index is headed to major support at 5,500-5,560 range. Rather than second guessing the direction of the breakout, it is always prudent to wait for the price to play its cards first.

The price action this week would set the tone for the next significant move in the Nifty. Those holding long positions may place a trailing stop loss at 5,880, basis the spot price.

Bank Index (12,197.25): Similar to the Nifty, this index too was in a short-term recovery mode and moved past the target zone of 11,950-12,100 mentioned last week. A breakout past 12,500 would indicate that the index could challenge the recent high of 12,961.

On the other hand, a fall below 11,950 would suggest that the index is still in a major downward correction. The trailing stop loss for the long positions may be placed at 11,940, basis the spot price.

As long as the index trades below the crucial resistance at 12,961, there would be a strong case for the continuation of the recent downtrend and a fall to 10,500-10,600 would be favored view.

Castrol India (Rs 329): After a minor consolidation, the price action on Friday indicates that the stock could make some upside progress. The sharp rally on Friday, backed by a pick-up in the trading volume, indicates buying interest in the stock.

The short-term outlook is bullish and the stock could test the immediate resistance at Rs 370. Long positions may be considered with a stop loss at Rs 303, for an initial target of Rs 370. Those willing to play the waiting game may get opportunities to exit at Rs 395-400 range.

Bharat Petroleum (Rs 405.15): The stock has been in a minor downward correction in the past few weeks. This correction appears complete if the sharp rally on Friday is any indication. The stock has bounced off key support level on Friday and the sharp surge in the trading volume strengthens the case for a short-term rally.

Investors may buy the stock on weakness, with a stop loss at Rs.370, for a target of Rs 455. A move past the initial resistance at Rs.455 could propel the stock to the major resistance at Rs 475.

(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.)