Nifty making a trend channel: The Nifty has made a trend channel since October 2009. After falling back into the channel, the Nifty reached its lower support level of 5200. This was as per our expectations. The Nifty has received support at the lower channel line and this can lead to a technical bounce back.

Short / medium term oscillator is oversold: The short/medium term oscillator
(Stochastics) has hit oversold levels. This diminishes the odds for the index to decline further at a quick pace. It suggests that the index may continue to drift down with brief intermittent rallies.

Outlook: The medium term chart of the Nifty has taken support at a perfect technical level. With indicators reaching oversold levels odds for a further decline are very low. We expe ct the markets to drift sideways for some time. It is a wait and watch situation.

Momentum gains upward bias: The medium / long term oscillator (Stochastics) has reached its oversold zone. Technically, this would mean that odds for a further downtrend have diminished in the index. The pull back rally in the short term is done with and the index may now witness a period of consolidation with a negative bias.

Outlook: While the medium term trend in the Midcap remains weak, short term technicals still do not indicate any positive divergence. Such a divergence normally precedes any sustainable short term rally. As for the medium term trend, we would prefer to be ina wait & watch mode.