Will Nifty Correct To 5000?

On a 4-hourly chart, Nifty has taken support at or around the lower end of the Andrew’s Pitchfork and closed above the technical level of 61.8% Fibonacci extension of the A-B-C move. Earlier on 7th March, 2012 it breached 5200 and tried to close below it. But late buying didn’t allow it that time. But this time, the negative global momentum on Euro Zone debt crisis and the recent weak China data along with the budget disappointment locally has put pressure on it and pushing it below 5200. In fact, yesterday Nifty filled the bullish gap which was created earlier in March, 2012. But this should be treated as a small correction within the bigger uptrend which has started from the lows of December, 2012 till 4960 is breached on the lower side.

Will Nifty Correct To 5000?

Now what to do. Let’s discus Nifty trading strategies and technical analysis.

If Nifty closes consecutively for couple of times below 5200, it may push it towards important levels of 5090 to 5100 where many technical levels are coinciding like the 4-hourly 200 moving average and 50% Fibonacci retracement of the up move from lows of December 2011 to the highs of February, 2012. It is also, a 100% Fibonacci extension of the A-B-C move. Even the MACD has fired a sell signal below 0 line. Overall, the technical charts of Nifty look weak for the short term with 5090-5100 as a near term support.

Also, USD-INR has made a good consolidation around 49.75 and is set to move towards important levels of 50.75-51. This again will put pressure on the Nifty on the downside if US-INR breaches an all important level of 51.5.

Downward sloping line has now become support

But if Nifty keeps itself above 5240 which is the 38.2% Fibonacci retracement and breaches 5390 on the upside, one can safely say that this small correction is over. Moreover, the downward sloping trend line which earlier acted as a resistance for last 1-1.5 years has changed its role and now should act as a support. Though the current close of Nifty is far from this trendline, the support might find place in between 5170 to 5190.

Going forward, the market will be digesting the proposed budget and the impact of new taxation and subsidies. In addition, the Reserve Bank of India will be a big focus as India’s 8.5% interest rate is widely expected to be cut. Some think significant rate cuts should spur significant growth in GDP and have the potential to propel Indian markets toward their all time highs set a few years ago. Others worry that February’s inflation number and the budget deficit are going to be the anchors weighing the markets down.

Now it’s your turn…..

Feel free to share your experience and thoughts in the comments area.

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