Nifty Weekly Outlook (30th August to 03rd September 2010)

Last Week ending on Friday (27^th August 2010) NIFTY lost around 2.20% and closed at 5408.70 as compared to the last week’s closing of 5530.65. Continuing the uptrend and also the rising consolidation pattern, NIFTY made a Long Black Candlestick on the weekly charts, which engulfed the previous week’s Candle too. As seen on the charts, NIFTY is forming a bullish consolidation pattern, with higher highs and higher lows, but at the same time RSI (Relative Strength Index) is forming lower highs, signaling a Negative Divergence, which is also a sign of caution that this consolidation pattern may turn into a Bearish Consolidation Pattern.  Last week, a good selloff was witnessed in the Markets due to appreciation of YEN against DOLLAR, which rose to 15-years high against Dollar, this created panic all over the Global Markets. On the last day of the week NIFTY made a low of 5391.95, as Cabinet approved the Direct Tax Code Bill in which the Corporate Tax Rate has been reduced to 30% from the current rate of 33.6% and also MAT of 20% has been levied, which disappointed the markets too.

For the week, NIFTY made a high of 5549.80, whereas a low of 5391.95. A purely Sector and Stock Specific play was witnessed in the last week too. TEXTILE, CEMENT, REALTY & INFRA, BANKING, OMCs & PHARMA Sectors witnessed a good run up in the last week. NIFTY has moved much above its 40-Days EMA (Exponential Moving Average) of 5133.8, but has breached the 20-Days EMA of 5455.28.

All the major International Indices after facing resistance are now trading near their important support levels, now from these levels a good bounce can be expected, or if the support breaches, a correction can be expected in the near term. For the next week, a good trading momentum will be observed in Sector Specific and other specific stocks, but then too traders should follow a cautious approach by following strict Stop Losses.

On the Global front, in US, the economic reports like consumer confidence, spending and sentiment; payrolls and unemployment; and monthly auto sales are going to be announced. In Europe, European Central Bank is going to unveil latest interest-rate decision.

With the ongoing uncertain global environment and results season, traders are suggested to trade cautiously by following Strict Stop Losses and avoid making fresh investments at this point of time.

For the next week, the level of 5550 / 5595 / 5630 will act as an important resistance, whereas the level of 5330 / 5270 / 5240 will act as an important support for NIFTY.