Its been a while since i wrote on Nifty. In my previous post I mentioned that above 10650 level we might changed our stance from bearish to bullish. This week it had two closings above that level which also coincides with the 61.8% retracement of the bearish move that the index in Feb and March. The correction later in the last week is a sign that the 10650-10700 zone has been acting as a supply zone.
So where are we heading now?
I would discuss two short term scenarios here, which might work in a week or two.
1. Secnario one: the index has an approx. 670 point rally in one stretch. It needs to correct and consolidate for a sound uptrend to resume. I expect a bare minimum 38.2% retracement, which is at 10527. Also 20 EMA is at 10555, as of today. So I may say that the 10527-10550 zone should act as support in this downmove. From this level we may see a sharp upmove for 11000-11100 levels.
2. Scenario two: The second observation is that we have already corrected a lot and there have been divergences on several indicators on short term charts, suggesting a correction on upside. In this case we might retest 10650-10700 levels first before we resume downtrend towards 10527-10555 zone. The rest of the story would be the same as that of scenario one.
Plz consider this as an analysis, not a forecast.
We need a break and close above 10785 for the uptrend to resume. The immediate target will be 11000.