Nifty view for the week starting 29th September

The week gone by:

We were 'Bearish' last week and advised Caution on longs. Nifty broke 8070 - 8000 and almost hit 7840 (low for the week 7841.80). The Index was very volatile on Friday, hitting the low for the week and rose sharply (nearly 150 points) to close at 7968.85.

Our 'Bearish' view on Bank Nifty also proved right as the Index nearly lost 7% (Down 1000 points) but rose along with Nifty on Friday to close 3.5% down.

The week ahead:

The Index has touched some important downward target at 7840 and reversed. Any move above the 'trend deciding level' for next week at 7990 - 8000 and close above 8020 will take the Index to 8140. The Index faces stiff resistance at 8160 - 8180. We don't see a move beyond this level for this truncated week. Outside upside target is at 8308.

The Index has received support consistently near the 50 day moving average through the year. The 50 day simple and exponential moving average are placed between 7880 - 7885. The Index if it breaches this support zone will move down to 7840 - 20. Though our view is slightly bearish, any slide to 7672 will be a bonus for bears.

The Candlestick patterns are forming continuation patterns and the weekly momentum indicators are at the brink to falling into neutral zone from over bought zones.

Index view for September Expiry week

Last week Nifty declined to 7925 before reversing sharply to come within striking distance of the all time high mark of 8180.20. The Index closed at 8121.45 for the week.

Friday's price action looks like a Shooting Star, though its tail is more than normal in length. The weekly Candlestick is a near perfect Hanging Man. Though the market is in a clear uptrend, these Candlestick patterns suggest 'Caution' if not Bearish sentiment.

For the expiry week, if Nifty were scale past 8180, the targets are 8214 - 8237. Move beyond this zone will have 8305 and an outer target of even 8450 (looks unlikely at this stage though).

On the flip side any breach of 8070 will make the Index slide to 8000, 7940 -25 & 7833. The outer downside target can be as low as 7740.

Very small negative divergence is visible in the weekly momentum indicators. Caution advised on Longs.

The Bank Nifty Index Candlestick patterns also suggest a near top. On the daily charts a near perfect Hanging Man after a long white candle is not a good sign for the Bulls. We have a Weekly Doji at the top. Doji's at the top are valued for calling market tops. Also negative divergence in the weekly indicators cannot be ignored even in a clear uptrend. Hence caution is advised on longs.