In our last post on Nifty Outlook, we expected targets of 6350 and 6400 for NIFTY on the basis of strong upward momentum in the market backed by strong FII’s flows.Nifty,however,after testing 6300 odd levels faced profit booking and was dragged down towards lower support levels and closed at 6140 on weekly basis.
On the daily chart,Nifty breached and closed below the neckline ( yellow line ) of the Inverse Head & Shoulder Pattern
which was placed at 6170-6180 levels and was a good support for the index.In the process,it closed below the rising trendline
( blue line ) indicating the short term bearish trend.
The short term leading indicators, the stochastics ( middle graph ) and the TRIX ( Triple Moving Average Crossover;lower graph ) have turned negative on the daily chart.On weekly chart too,Nifty is in overbought area and is pending for a correction with momentum oscillators turning negative.
In Friday’s session,FII’s sold Index Futures of worth Rs 1087 and bought index options of worth Rs 668 indicating bearish mode of Foreign Institutions on the markets.
On the options side,the highest open interest for the Nifty Call option ( left red oval ) has shifted to 6300 from 6400,thus lowering the upper ceiling for the market.The highest open interest for the Nifty Put option ( right red oval ) lies at 6000 which may provide support to the market on lower side.
Looking at the overall scenario,we expect Nifty to trend lower as long as it stays below 6180 on closing basis.Hence,short positions can be taken in Nifty below 6180 levels for lower support targets of 6040 and 5980 keeping a stop loss at 6230 levels ( spot levels ) .