Nifty Technical Outlook: Index Overbought, May Trend Down Again After A Couple Of More Bullish Weeks

The Technical Bounce I had predicted seven weeks ago in my weekly note has played out nicely, with the NIFTY rising nearly 8.3% over the past two months on the back of strong momentum.

As expected, the NIFTY has continued its bounce after breaking past the middle Bollinger Band - at the very least, signalling that we're not quite ready to enter a full-fledged bearish cycle - yet.

That said, two things are worthy of note that this stage. One, the stochastic oscillator now sits firmly in overbought territory meaning that the bulls will run out of steam soon. Two, there's only a 200-odd point gap between the current levels and the upper Bollinger Band on the weekly charts - which has traditionally served as a very strong resistance level - and will likely continue to do so, given that the band itself has been flattening in shape over the past several weeks, signalling what may be the cusp of an extended range bound phase for the markets as a whole.

To sum up - there's a 200-off point upside from here on in this particular cycle. If you missed the bus and are considering entering now for a positional trade - hang on. We'll probably see the bellwether index trending down again, after a couple of more bullish weeks.