Nifty has resistance at 4167: Asit C. Mehta

Nifty BSE | NSE 25/05/12 Are Mutual Funds betting on Nifty?

According to Asit C. Mehta Morning Report, for this week, the Nifty has resistance at 4110, 4167(short term break out point), 4215, 4246(strong for short term), 4351-4387,4448-4468 and 4506.

Asit C. Mehta Morning Report:

Market expected to open up

Indian market is expected to open up on weak crude oil prices and firm global stocks. Asian markets are trading firmly up. The Nifty Futures in Singapore is trading up by 2%.

Technical Analysis

The Nifty traded with the negative bias in the early part of the week. On Wednesday, it made bottom for the week then recovered sharply. The Nifty closed with a marginal gain of 1% on a weekly closing basis. The Nifty opened at 4047.45 and made a high of 4118.10.It made a low of 3490.20 and closed at 4092.25. The volume in Nifty futures increased towards the later part of the week. F&O positions indicate, a huge amount of short contracts have been squared off. The Nifty futures open interest shed in excess of 20 %. However, such a recovery was not seen in the mid cap and small cap stocks. They ended in the red on a weekly closing basis. The discount was at 24 points.

Last week we had mentioned, some early weakness would be there and 3762-3773. (May be a reversal point). The Nifty made a low for the week 3790 and reversed. However, to come to a conclusion whether it is a reversal point, we need more evidences.

Indian market is expected to open up on weak crude oil prices and firm global stocks. Asian markets are trading firmly up. The Nifty Futures in Singapore is trading up by 2%.

In the daily charts, the Nifty closed above 5,10 and 20 day "SMA". The Nifty closed above 20 day "SMA", since from 21st May. During the previous attempts, the 20-day "SMA" was acting a stiff resistance. It is a bullish sign. Two more days closing above this average will confirm the strength. The Nifty closed above 13 day "EMA" and below the 34 and 89 day "EMA".

The RSI is in positive mode. Both the stochastic are in positive mode. Both made positive divergence and came out of the over sold zone. The swing trade after entering into the negative mode became neutral on Friday. The ADX is converging and about to generate the fresh buy signal. The faster line of MACD touches the signal line and turns upwards. This is one of the classic bullish sign. The Nifty futures (as well as Sensex cleared the two gaps formed on day (9th and 15th July) levels. The only thing is the Nifty is trading under PSAR in the daily charts, which is currently placed at 4166.48. In the daily charts, the Nifty is forming a lower top and lower bottom formation so far. Any close above the upper line of the down ward channel will give clues for the further strength.

In the weekly charts, the Nifty was well below the 5,10 and 30 week " SMA". The pattern in the last week was a " Hammer pattern". Both the stochastic are in highly over sold zone, with the fresh buy signals. The swing trade is negative. The ADX is in sell mode. The RSI is in a sell mode. The MACD is in sell mode. However, the pattern in the weekly charts, suggests we are close to bottoming out, though not a classic one. In addition, the Nifty was taking near to the trend line drawn from May 2004, from the bottom of 1291. The medium term trend is till not clear.

In the monthly charts, the trend line support lies at 3760-3770. Any decisive close below this level or any monthly close below 3745 will led further weakness in the coming months.

Outlook

Nifty is near to a short term breaking out.

Based on the above rationale, the Nifty is expected to trade with a positive bias, provided the Nifty was able to close above 4110 or trade above 4167. Any failure to clear these levels would put Nifty again in range bound move with a downside bias.

For this week, the Nifty has resistance at 4110,4167(short term break out point), 4215,4246(strong for short term), 4351-4387,4448-4468 and 4506. The Nifty has support at 4021-4043,3960,3926,3823,3790(strong for short term), 3750-3760(strong for medium term on closing basis) and 3615-3630.

Strategy

Traders can create fresh long positions above 4167 or a closing above 4110. Preferably choose derivative strategies.