NIFTY Weekly Outlook – Bellwether Index Continues To Be Range Bound
The bellwether index fell by 0.59% last week, completing yet another volatile, range bound week as prices oscillated firmly within the Bollinger squeeze pattern that we are witnessing on the daily charts.
In the absence of any strong positive cues, and with the faster than expected economic recovery priced in fully, equities are struggling to find definitive direction at this stage.
On the economic front, the PMI (Purchasing Managers Index) fell by 0.4, but remained above the critical 50-point mark that signals a contraction.
The worry for the bulls would be the fact that if the tension keeps building up in the index, it's only a matter of time before it breaks down from the squeeze and begins to head towards more rational levels.
On the monthly charts, we witnessed yet another Doji Star pattern, further underscoring the indecision that reigns supreme. In a market that wasn't so plush with liquidity, we would have witnessed a steep correction a long while back.
The weekly charts have already started showing cracks, with signs pointing at a minimum correction of 500 points, towards the 20 week moving average. If it doesn't hold that support, we could very well witness a free fall to 14,000 levels quite quickly.
The immediate prognosis continues to be range bound, with chances of a break down outweighing those of a breakout at these levels. Investors are advised to tread cautiously in these richly valued markets.
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