NIFTY; A TECHNICAL PERSPECTIVE

• The last major up-move period was from 20/12/2011 when the NIFTY closed at 4544 to 21/2/2012 when it closed at 5607 thus marking the lows and highs of the said upmove. This gives us the closing basis upmove range as 4544 to 5607. Using this 20/12/2011 to 21/2/2012 period as the base, we come across some rather interesting levels which give us insights into what may pan out in the future.
• Firstly, ever since the high of 5607 was touched on 21/2/2012, the NIFTY has been range bound between 5607 on the upside to 5195 on the downside. Interestingly this level of 5195 corresponds almost exactly to the Fibonacci 61.8% level which stands at 5198.
• Secondly, it is observed that as time has progressed after 21/2/2012, the range has gotten progressively compressed; ie MARCH 2012 saw a NIFTY range of 5464-5194 but APRIL 2012 has seen the NIFTY range-bound between 5360 and 5189. The latter half of APRIL 2012 has seen the range compressed even further to 5300 - 5189.
• Thirdly, it is seen that thus far, 31/1/2012 onwards, Fibonacci 61.8% level of 5198 has stood the test and has been a solid closing basis support, even though in the past few sessions the NIFTY has been flirting with it but not broken it decisively on the downside.
• Fourthly, the 50% retracement level at 5073 was last touched on 30/1/2012.
• Fifthly, the 200 DMA at 5130 has also held out thus far,

Therefore, in my opinion, on the downside in the zone 4950 to 5200, there are multiple strong supports ie the Fibonacci 61.8% at 5198, the 200 DMA at 5130,  the 50% retracement level at 5073 and the Fibonacci 38.2% at 4948 ergo, on the downside, 4950 should hold even in the worst case scenario. It also means that if it doesn't then we are in trouble.

Gauging the upside from here on is a lot tougher but I would like to first see the NIFTY close above 5200 consistently for some sessions followed by closings above 5278 for some more sessions. The next resistance would be at 5315 (the 50 DMA) followed by 5375 which roughly corresponds to the Fibonacci 78.6% level. Consistent closings above 5375 would open out further upsides to 5600 and possibly beyond.

Thus, the verdict, and a rather boring one at that, I'm afraid,  is that the NIFTY is likely to be rangebound betweeen 4950 on the downside and 5300 on the upside. A decisive breakout above 5300 will depend a lot upon the Macros, both global as well as local. So a further onset of global risk-on coupled with some decisive steps by Government vis a vis Reforms / favourable resolution of GAAR etc could be the game changer next month and beyond.

We live in hope!!!