Nifty Technical Outlook: Markets May Turn Moderately Bullish, Post Correction

Propelled by heavy short-covering, the NIFTY sprang ahead last week, breaking its previous high as well as closing beyond its previous highest close on the weekly charts. Ahead of the F&O expiry, the Nifty 11000CE witnessed heavy short covering to the tune of ~9.12 lakh shares on the first day of the week, setting the tune for the week.

The upward slanting middle Bollinger Band, observed for the first time last week, seems to be materialising. This may be an early signal of an overall trend reversal from "range bound" to "moderately bullish", although the next two weeks will confirm that.

The long green candle means little in itself. We'll have to watch out for what happens next week. It's quite likely, given the overbought momentum oscillator, that we'll witness a 'dark cloud cover' formation materialising next week (a positive opening, followed by a trend reversal intra-week). If that does happen, we'll most likely see a bearish reversal taking place over the next few weeks, that'll drag the index down a few hundred points before taking support once again.

Don't jump in to buy just yet, as a correction is most likely around the corner. The only thing that's changed substantially is the expected quantum of the correction - we might actually see a weak bullish trend re-emerging after a drop of 400-500 points over the next wave that'll last for a few weeks.


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