Nifty Technical Outlook: Broad Trend Is Bullish, But A Retracement May Be Imminent

The NIFTY continued its unrelenting ascent last week, “walking” the upper Bollinger Band and adding another 70 odd points.  The broad trend has turned clearly bullish, with the current wave taking the index 500 points higher than the top of the previous one.

In this scenario, when a bullish trend is strong, prices tend to hug the upper Bollinger Bands (this is known as “walking the bands”). When prices exhibit this phenomenon, it is understood that the uptrend is quite strong. Occasionally, prices may revert back to the 20-period moving average line, but is expected to now remain above the middle Bollinger Band or 20 week moving average with a high degree of probability.

In the short term, we’re likely to witness a minor pull back from here to around 11,400 to 11,450, as the index showed early signs of a bearish momentum crossover on the daily charts. In the medium term, upside remains capped while a downside of 400-500 points remains a strong possibility. However, with the index trading at 28 times current earnings, it’ll be interesting to see how well the rally sustains post the next wave of correction. For now, the bulls appear.



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