Index Watch Outlook : PINC Research
Trendline Resistance: The Nifty has adhered to a falling trend line since last week of April, 2011. This blue coloured trendline (refer chart) has been acting as a resistance in the short term.
Short / Medium Term Oscillator: The short term oscillator apart from being oversold is now exhibiting positive divergence. The medium term oscillators continue to be on the buy mode after a good weekly closing.
Outlook: Last week’s Nifty movement illustrated the following features. 1) Pace of the declines is slower compared to rallies. 2) Volumes are languishing at extremely low levels. 3) Emergence of "Harami" pattern which is a bullish pattern in technical parlance. 4) Technical indicators and oscillators apart from being oversold are now exhibiting positive divergence. All these reasons only points out to minimal downsides from current levels. Any possible upmove and a breach of the blue trend line could result in a sustainable recovery in the short term. We continue to be positively biased for an upmove.
Short/Medium term Oscillator : The short term Oscillators in this index have reached oversold levels after last few week’s of unrelenting downmove. These oscillators are now also pointing out to positive divergence pattern. The medium term oscillators is still in a buy mode.
Outlook: Inspite of mirroring the benchmarks, the Mid Cap Index had a week of underperformance compared to the benchmarks. This was largely to be expected after weeks of outperformance to benchmarks. Most of the factors similar to Nifty like selling exhaustion at lower levels, positive divergence in technical indicators and oscillators etc. all point out to minimal downsides for this index and a fair probability of a strong bounceback. These factors only reinforces our positive view of this index. There is a good chance for this index to be giving higher percentage returns compared to the benchmark if the positive undertone prolongs in the coming weeks. We maintain that at the current juncture, the index continues to offer an excellent high risk high return opportunity.