Nifty is below 10,930, threat of significant correction looms

Capitalstars investment advisor

The Nifty50 on weekly basis close in positive with gains of about 0.5 percent. It managed to close around its crucial levels of 10,800.Surprisingly, this is the 4th positive weekly close in a row. But, the price behaviour throughout these 4 weeks remained sluggish with long lower shadows suggesting dips were considered as a buying opportunity.

However, in the current week, the price remained extremely narrower with a weekly range of 138 points indicating time may be ripe for a breakout in either direction.

Supports have certainly not shifted higher though we are seeing some price appreciation. Chart pattern continues to remain bearish as long as Nifty50 trades below 10,930 levels thereby leaving a room for downswing which if materialises has the potentiality to drag down the index below 10417 level where a corrective structure will get culminated.

Hence, to turn completely bullish, we insist for a breakout above 10,930. On such a breakout a sustainable rally can be expected with new highs.Unlike Nifty50, charts of Bank Nifty looks bullish to us as it is moving in an ascending channel for the last 3 months or so. On last Friday, it just tested the demand line of the said channel.

As long as this index remains inside, the said channel things shall remain positive for this index with initial targets of 27,000. Our positive outlook will turn negative on a close below 26,150 levels.

The possibility of high networth individuals (HNIs) in India selling their equity holding and investing in real estate is a key risk for the Indian markets, writes Christopher Wood, managing director, equity strategist at CLSA in his weekly note GREED & fear. He advises investors consider investing in real estate as an asset class.

Pharma along with IT was our top contrarian bets for the year 2018 as published in this column on 30th of December 2017 under the title Contrarian investor will make money in 2018.

Obviously, on charts, this index is looking more promising as the recent low of 7,900 has retraced 62 percent of its entire rally from 2009 lows of 1,968 – 14,020 with a multi-year down move inside the downward sloping channel.

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