Short Term Target 4950 on Nifty

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The Nifty opened on a weak note today and continued its downward journey to go below our strong support at 4670 but then (thankfully) recovered to close near 4790. There was a pivot high near 4800 which the Nifty crossed today but then closed below it. A move above 4813 should now push the Nifty in a short-term uptrend. A move above this level will have a target near 4950 in the short term. It makes sense to buy calls, with 4900 or 5000 as the strike price, for the time being and cover after Nifty reaches 4950.

Seen here is the 30 minute chart of the Nifty along with its Relative Strength Index (RSI). On this chart, there are a few positive indications, the most important being the break of a downward sloping trendline. Among other positive indications are the positive divergences between the price and the RSI. As explained in previous newsletters, a positive or a bullish divergence occurs when the price makes lower lows/lower highs and the RSI makes higher lows/higher highs. In this chart, there are two such divergences visible, as marked by the dotted lines and the arrows. But these divergences give a confirmation of a trend reversal only when the trendline is broken and that has happened today. So, we should easily be looking at a target of 4950.

In the short term, pharma stocks, cement stocks, realty and infrastructure stocks are looking good and day traders can look for opportunities to trade in these stocks. As and when opportunities in the medium term (10-30 days) come about, we shall discuss them in the newsletters here.

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