Index Watch Technical Analysis by Pinc Research

NiftyNifty making a trend channel: The Nifty has made a trend channel since October 2009. After falling back into the channel, the Nifty reached its lower support level of 5200. This was as per our expectation. The Nifty has received support at the lower channel line and this can lead to a technical bounce back.

Short / medium term oscillator is oversold: The short/medium term oscillator (Stochastics) has moved up after it hit oversold levels. This diminishes the odds for the index to decline further at a quick pace. The index has moved sideways albeit with high volatility. This tendency is likely to carry into the next week.

Outlook: The medium term chart of the Nifty has taken support at a perfect technical level. With indicators reaching oversold levels odds for a further decline are very low. We expect the markets to trade sideways for some time with high volatility. It is a wait and watch situation as the index is not gaining any directional thrust as yet.

Momentum gains upward bias: The medium / long term oscillator (ROC) has begun to show a positive divergence. The index has made lower bottoms and lower tops in its daily chart. However, the corresponding levels in the ROC chart are showing equal bottoms and higher tops. This is indicating bearish fatigue and suggesting that the index may have bottomed.

Outlook: Both the medium term and short term trend in the Midcap remains neutral. But the daily charts are showing a positive divergence suggesting that the trend may have bottomed. While it is still a wait and watch for some more time, the bias is shifting to the positive side. We expect positive developments in this chart over a period of time.