Market is leaving everyone guessing on the direction in which it will break out of this range. Technical analysis of the market may be helpful in guessing the final direction which the markets are likely to take.
We are going through a phase of consolidation where Nifty is talking resistance at 5180 – 5200 levels and following a trend line support at 4800 levels. This is also the likely range for the next few trading sessions. This has helped Nifty in forming a triangular formation. The high for the month of December was 5182.55 whereas the low for the month was 4943.95.
On the charts a reverse head and shoulder pattern is being established. A breakout conformation of this pattern will be confirmed if Nifty breaks up the previous high of 5182.55 and closes above that level. If this happens we may find Nifty moving up till 5500 in a hurry.
This phase of consolidation may not last for long and we may see a big move coming in during the next couple of weeks. Since there are some concerns about the negative sentiments that persist in the markets, we believe that if 4800 levels hold, this consolidation would have provided a good buying opportunity.
Nifty is trading near the oversold territory and is taking support at 61.8% retracement zone at 4800 levels. Volumes were a bit lower than average daily volumes.
The long term uptrend is still intact. For the time being participants may hold their current holding and a stop loss at 4800 levels is suggested.
First Support in Nifty exists at 4800 after which we may find Nifty falling down to 4540 levels. On the up side first resistance exist at 5200 levels which is acting like a strong glass ceiling for the time being. Once 5200 is breached we may see Nifty facing resistance at 5500 levels.
We conclude by advising holding on to your positions and buying on declines, keeping 4800 levels of nifty as a stop loss.
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