Weekly Timeframe: After showing minor upmove during last week, Nifty shifted into sharp upmove during this week and closed the week with hefty gains of around 221 points, as per w-o-w basis.
- A new all-time high has been formed around 9913 levels and Nifty closed the week near the upper end of weekly range (high low of around 9913-9646 levels).
- A long range bull candle has been formed during this week, which is suggesting a strong buying enthusiasm in the market for this week. Though, formation of such long bull candles signals sharp buying interest, but the formation of such candle patterns after sustained upward move or at the new all-time high area could be viewed with caution for long positions. Reason, such patterns more often leads to reversals from the important highs.
- A long term up trend line (median line-green dashed) connected from the bottom of 2252-Oct-2008 is present and the Nifty is now tagging the area of this trend line around 9900 levels. Normally, the resistance area of such trend lines more often leads to profit booking from the highs. Hence, the area of 9900-9950 is going to be crucial for next week.
- We observe higher high formation in Nifty with recent swing as per weekly timeframe, but the weekly 14 period RSI is not moving in sync with the market (RSI is not showing higher highs). This pattern could develop the formation of negative divergence in Nifty/RSI as per larger timeframe.
- Larger positive sequence of higher tops and bottoms is intact and this week’s up move could be in line with the formation of new higher top the sequence. But the formation of higher top needs to be confirmed with the weakness by next week.
- Nifty as per smaller and larger timeframe is still positive and there is no confirmation of any reversal pattern at the new highs. But, the overall chart pattern is hinting at the possibility of beginning of correction from the highs in the next 1-2 weeks.
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- Hence, the maximum upside could be limited up to 10k mark and there is a more possibility of resumption of profit booking in Nifty from the highs. Initially we expect near term reversal in the market in coming weeks.