Nifty will target 5,250; Rupee may continue its rally

Special to Firstpost

S&P CNX Nifty (5,068.35): Contrary to the expectations, the index ruled distinctly firm during the trading week ended 8 June. There are a couple of interesting factors to note from a technical analysis perspective. The first aspect is that the index has managed to break out past the multi-pivot green line highlighted in the attached chart.

This line has acted as a sort of balance between bullish and the bearish forces. The breakout past this line on Thursday was a positive sign. What is even more pertinent is that this line was defended by the bulls on Friday and the index staged a smart recovery towards the close.

The other point to note is that the support level of 4,750-4780 was defended by the bullish camp. Unless we see a break below 4,750, it would make sense to lean on the long side.

[caption id=“attachment_337758” align=“alignleft” width=“380” caption=“As highlighted in the chart, the Nifty now is perched just below the upper parallel of the blue downsloping trend channel.”] [/caption]

While there is reason to be bullish, there is a strong resistance nearby. As highlighted in the chart, the Nifty now is perched just below the upper parallel of the blue downsloping trend channel. A breakout past that line could trigger a rally to 5,250-5,300 range.

To conclude, until 4,780 breaks, it would be safe to work on the assumption on the index would target 5,250. Let’s discuss higher targets once the Nifty conquers 5,250.

CNX Bank Index (9,998.95): The sharp recovery in this index was instrumental in propping up the benchmark indices. The Bank Index has managed to clear the bullish trigger level of 9,950, which is a sign of strength.

A buy signal has also surfaced in the Point-and-Figure chart with a projected target of 10,800. Price weakness may be used to take long positions for a target of Rs 10,800. From the banking sector, Bank of India, Bank of Baroda, IDFC and Axis Bank come across as top picks.

USD/INR (Rs 55.43): The view for this currency pair remains unchanged. As expected last week, the US dollar slipped to the support zone of Rs 54.50-54.75 and staged a recovery on Friday.

The outlook for the US dollar would remain bearish (rupee to strengthen) as long as it trades below the resistance level at Rs 56.75. Unless the dollar makes a swift move above the resistance at Rs 56.50-56.75 range, there would be a case for a downward correction to the next support at Rs 54.30.

IDFC (Rs 132.55): The stock, recommended earlier in this column dated 12 May, is now within striking distance of the then mentioned target of Rs 135. The outlook for the stock remains bullish and a rally to the next resistance at Rs 145 appears likely.

[caption id=“attachment_337756” align=“alignleft” width=“600” caption=“The outlook for the stock remains bullish and a rally to the next resistance at Rs 145 appears likely.”] [/caption]

Long positions may be considered with a stop-loss at Rs 123 for a target of Rs 145. A breakout past this initial target would trigger a rally to the major resistance at Rs.155.

(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.)