Decisive Break Over 12,125 Remains Key To Continuity Of Rally

The NIFTY approached a key resistance level last week, with the wave completion of the rally that began in September within sights. News wise, it was a positive week, with the fed reducing rates, YES Bank claiming to have found a strategic investor worth USD 1.2 Billion, and the RBI moving in to spell relief for PMC Bank clients.

On the technical front, we witnessed two key developments last week. First, we saw the index reaching the upper Bollinger band on the daily charts, implying that the swing rally that began around the 11,500 mark when it bounced off the 20-day moving average mark, may hit headwinds at current levels. Second, we saw the stochastic oscillator moving firmly into the overbought zone on the weekly charts. These two signals indicate that we may be a couple of hundred points or so away from a retracement of the powerful 1100-point rally that was sparked off in September by the tax cut announcement. 

While today's strong opening indicates that the bulls are firmly back in control, this week is a critical one from the perspective of defining the immediate strength of the rally. A decisive break and close above the upper Bollinger band on the weekly chart (12,125 levels or thereabouts) would imply that the NIFTY will continue to chart its upward course and make new highs in the months to come. All eyes on Fridays closing and the 12,125 mark for now!

DISCLAIMER: Futures, stocks and options trading involves substantial risk of loss and is not suitable for every investor. If you do not fully understand these risks you must seek independent advice from your financial advisor. All trading strategies are used at your own risk.