NIFTY: July View

NIFTY was bearish in June with the MIDCAPS leading the sell off. Every other day, we had some or the other midcaps falling 15%-20% and some of these were in the derivatives segment! Apollo Tyres, Titan, JSPL, FRL to name a few. Last Week we had told the importance of the 5500-5550 level and had forecasted a good bounce from these levels. The monthly rising trend has a good support at this base.

Last week's NIFTY monthly chart

And indeed, NIFTY got a good bounce from 5570 levels and within a span of 2 trading sessions gave a bounce of 250 points! So what do we expect in July? Well, July will be a busy month as Q1 results start pouring out which will considerably drive the markets. We won't speculate the results (Yet). Let's have a look at INDIAVIX.

Fear Factor: INDIAVIX

VIX is also known as the volatility indicator. It is an indicator of fear in the markets. When it spikes, it shows negative momentum and fear in the markets. When in falls, it shows rising confidence. This is a daily chart of the INDIAVIX. On 24th, 25th and 26th June, the VIX gave spikes and nroke resistances at 20.5-21 levels. That made our view of downside being open. But then on the last 2 trading sessions of June, the VIX reversed and fell! That means the breakout was false. The VIX fell and found support at it's rising trendline support of 17.62. Now the VIX gives a pattern of higher lows and higher highs. This means that some negative momentum still exists. If however, 17.62 breaks then that means the markets will get stronger. The VIX will find supports at 15.9/14/13. If these levels come, we can see 6300 on NIFTY. But if VIX takes a bounce now, it will find resistance at 20. Also touching 20 will form a H&S pattern in making. If however, 20 breaks we can see 22-25 levels soon. That will be bearish for the markets.

Sometimes, lines are more clear than candlesticks. This chart shows a beautiful range being formed with upside ay 6250-6300 levels and a neat breakout at 5700 levels. The resistances are at 5850/5950/6050. +/-20 points on each levels. Nifty has formed a gap at 5700-5740 levels and all will expect this gap to be filled. But going short just could be a way of capital erosion now. It might take days, weeks, months or years for this gap to be filled. Or maybe the gap won't be filled at all!

Look at the gap, it is a big gap. Close to 1% in price. This makes 5700 a very strong support. Also, look at the MACD crossing the signal. It has NOT YET crossed but could be a possitive sign if it manages to cross. Now for this week, markets will face selling pressure at 5880-59000 level which could take it down to 5750 and 5700 levels. A lot will depend on the results coming, dollar. A key trigger we believe will be the raising of the FDI Cap which could happen earlier next month. Breaking above 5900 could send the markets to 5950-70 levels which become the next resistance.
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