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NIFTY - Medium Term Technical Outlook

Technical indicators are suggesting an equity market that will delight swing traders, much consternate mercurial investors who have grown used to seeing only fantastic CAGR returns from their equity investments. Your success mantra in two words right now?

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The past two weeks saw the NIFTY unexpectedly breaking down past the 20-week moving average or the middle Bollinger Band, after appearing to be taking support at those levels. Thereafter, it made its way down to the lower Bollinger Band, currently stationed near the 10,000-mark. As I write this, the bellwether index is trading at around 10,300 points.

Another important observation is that the Stochastic oscillator, traditionally seen as a reliable indicator of momentum, is now about to move firmly into the oversold territory, indicating that a momentum reversal may be on the cards.

The shape of the Bollinger Band quite clearly continues to indicate that we are on the verge of entering what will be an extended range bound phase in the equity markets - one that could last several weeks or even months. It would be fair to say that the strongly bullish trend which was confirmed in January 2017, has now tapered off - and we will likely no longer see a unilaterally bullish market for some time now. A time correction is on the cards, and even hardcore equity aficionados would do well to consider adding anything from 25% to 40% fixed income to their portfolios in order to balance out portfolio returns.

What's on the cards now? Most likely, a choppy rebound till the 10,800 to 11,000 mark. Any downsides below the 10,000 mark appear to be limited, so fence sitters who were searching for an entry point for their equity investments may consider making a staggered entry over the next two to three weeks.

While the interim trend appears to be turning moderately bullish, upsides will most likely be capped. Technical indicators are suggesting an equity market that will delight swing traders, much consternate mercurial investors who have grown used to seeing only fantastic CAGR returns from their equity investments. Your success mantra in two words right now? Asset Allocation.


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