Bullish Momentum Reversal Likely From Current Levels

The NIFTY logged its highest one-day rise is nearly two and a half years on Friday, registering its first weekly positive close in as many as six weeks. The unexpected bounce came in the wake of a sudden US$ 5 fall in crude prices, as well as a slight welcome relief for the Rupee. 

Dipping below the lower Bollinger Band on an intra-week basis, the index rebounded strongly and formed a classic Bullish Hammer pattern, indicating that a reversal is likely on the cards at this stage. In fact, with the stochastic oscillator nearing the oversold zone on a weekly basis as well as a daily basis, the dual timeframe momentum hypothesis points to a strong likelihood of a recovery in stock prices from current levels.

The current support level is a critical one for the NIFTY, mainly because a reversal from this stage will reaffirm that the broader bullish trend is still intact, as the rebound will have taken place from a level that’s 5% higher than its March ’18 lows, which saw it dipping back into 4 digits.

We’re likely to see the index creeping back to the 11,000 mark over the next few weeks, with 10,650 being an immediate short term target.

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