The DIRTY picture or the BIGGER Picture

After the massive rise from 4531 to 5629 in 2 months, the last standing bear had become bullish and had started talking of new highs in Nifty (above 6350). Targets of 7500 were also given on some channels.

The rosy picture soon became a DIRTY picture from 22nd February, and Nifty fell all the way to 5171, supported by the dismal performance of the ruling Congress in the state elections. As expected, the last bull became bearish and targets of even 4900--4200 were given.

Here it pays to see the BIGGER picture - weekly chart of Nifty. During the massive rise to 5629, Nifty had broken through a parallel channel above 5250-60.


Weekly charts seem to indicate that the subsequent fall is nothing but a retest of the breakout, and the recent low 5171, was exactly on that trendline. Additionally, the 200 DMA also could not be ignored.

Once bulls realised on Wednesday that they had managed to successfully protect the trendline as well as the 200 DMA, they did what they do best - a gap up today of almost 50 points (this gap may or may not be filled in coming days).

No sooner had they managed to trap bears today, good news started flowing in - a 75 bps CRR cut, and also rumours again of abolition of STT.

As long as the breakout above 5171 holds (the trendline), a simple arithmetic calculation gives a target of 5920 - 6000 in coming weeks / months.

In the process, the current weekly candle is a long-legged doji (almost a hammer), and once the high of 5382 is crossed next week, bears might panic. This level is just 40 points away from today's close and another gap up on Monday can take Nifty above 5382.

Happy trading.