Mount 10K on Nifty will not come in a hurry; 9,550 remains key support for markets

The Nifty50 might by just down 0.4 percent from its record high of 9,709.30 recorded earlier this month but there is one thing which traders can’t ignore and that is momentum which has clearly slowed down.

The Street which was abuzz with a Nifty50 target of 10K in a hurry in the beginning of June series has now curtailed its expectations. Technical chartists suggest some more consolidation before index eventually moves higher but it is not a ‘top’ for markets.

Rangebound movement witnessed in the last 7-10 days along with low volume activity suggests that bulls should tread with caution as bears could overpower D-Street anytime. Traders are advised to trade with strict stop losses.

“The current Nifty50 run doesn't sit well with anyone. Traders who didn't buy feel cheated and pray the market goes down, people who bought early in the rally and have long since booked profits want a correction so they can get back in,” Kunal Saraogi, CEO, Equityrush.com told Moneycontrol.

“But, can the markets correct for real? Sure they can and now is as good a time as any for them to lose some altitude. I for one don't believe that 10,000 will come all that easily on the Nifty. It will have to be earned,” he said.

Saraogi further added that charts indicate a general lack of participation and clear signs of index being propped up. Momentum indicators have long parted ways with the indices and moving against the markets creating divergences.

Does it feel like the top? Tops don't feel like tops until it is too late. If you are an investor reading this then there no reason to call this as a top just yet but a correction may well be on its way, suggest experts.

Technically speaking, at this juncture in the absence of technical evidence, it will be difficult to project that a top is in place which will be clear only with retrospective effect. However, a break below key support levels such as 9,500-9,550 could well shift the trend.

While trading, if we presume that market will top out after 2-3 percent rally then subsequent correction can be much bigger making risk reward ratios unfavourable, suggest experts.

“For the current scenario, by using certain technical studies and parameters we can make an educated guess that top may be around the corner and hence even if recent high of 9709 is taken off then upsides will not be substantial,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.

“If you remember Nifty started correcting before last expiry just for 6 days from 17th of May – 24th of May, it just lost 2 percent whereas many individual scrips were down by 10-20 percent in 2 -3 trading sessions because of panic and most of them are yet to recover despite robust rally witnessed since expiry session of May series,” he said.

The Nifty50 is showing signs of fatigue since the last few sessions. On the weekly chart, Nifty has formed a Doji pattern for the last week, which shows loss of momentum on the way up.

“The short term momentum indicator is also showing loss of momentum. Nevertheless, the trend, which is determined by the price itself, still remains positive,” Gaurav Ratnaparkhi, Senior Technical Analyst, Sharekhan told Moneycontrol.

“Breach of the support zone of 9,550-9,500 is needed to confirm the short-term trend reversal. Till then the outlook remains bullish for the target of 9,815,” he said.