Investment Strategy 2016 - 3: Technical trend
In strict technical terms, Nifty is poised to begin 2016 with
downward bias. On weekly and monthly charts it is weak on most parameters,
whereas on daily charts it is marginally weak.
At present Nifty is trading 4% below 200DEMA of 8086.
Historically, markets have not sustained at levels more than 10% below 200EDMA.
Thus Nifty has strong support around 7200 mark for next 3months. The support
level will rise after March when 200EDMA jumps on base effect.
Moreover, Nifty also finds a strong support at 7000 level on the
long term rising trend line from March 2009 lows.
Thus, my technical outlook for 2016 is as follows:
(a) 1Q2016: Nifty may mostly trades between 7200-8050
range, with a negative bias.
(b) If Nifty ends 1Q2015 below 7400, Nifty may peak
around 8400 levels in 2016. However, if Nifty ends the first quarter close to
8000, we may see material gains in rest of the year with Nifty likely scaling
new highs. At this point in time the later scenario looks less probable (25%)
as compared to the former (75%). Anyways, strong buying opportunities will
exist below 7400 Nifty level.
(c) Bank Nifty appears marginally worse than
Nifty on charts, suggesting that the down moves will likely be led by banks,
whereas the up moves will see more diversified leadership.
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