By Anand James
Through the last week, bulls and bears traded blows, but 27th May’s break away from the month-long consolidation encouraged bulls to play a strong up move. Nifty’s sharp bounce back in March, after testing lows similar that of May also backed the surmise that an uptrend aiming the 200D SMA of 17269 could unfold. However, after a sizeable leap, albeit brief, mean reversion move unfolded on 2nd June, soon after testing the 60D SMA suggesting that bulls do not want to get ahead of themselves, given the event risks ahead, by way of RBI rate decision on the 8th of this month, as well as US NFP data, which serves as a leading indicator towards Fed decision later this month.
Further, VIX, a measure of volatility, fell 1.7% despite Nifty registering a 228 point fall from the day’s top and closing near the day’s low. Meanwhile, RSI of small caps are still below 50, suggesting there are no froth or overbought situations yet, which would have otherwise called for a panic liquidation. And, despite such a steep fall in Nifty, 67% of NSE500 stocks closed above Thursday’s high, suggesting that sentiments have not turned bad, just cautionary.
The 16460-400 region in Nifty will continue to be a catchment area for dips, and favoured view expects the same to hold for a two stepped uptrend to unfold, aiming 16950 first and 17200 subsequently. Alternatively, a slippage past 16140 will force us to switch sides, though our expectations towards such an outcome next week is low.
(Anand James, Chief Market Strategist at Geojit Financial Services, Views expressed are the author’s own.)
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