Nifty closed the week almost unchanged (weekly charts left pane). The week saw a red candle and when compared to the close of the previous it is the second weekly red candle. For the last 5 weeks, Nifty is caught in a trading range between 15950-15500. This narrow ranged movement is taking shape of a pause within an ongoing trend.
The pattern under observation is a 3 weeks tight pattern. This is a continuation pattern and usually when the pattern resolves on the upside expect the prices to see a rally to higher levels. Secondly Nifty has touched the rising trend line that is coming up from the lows of the last several weeks.
On the daily time frame (right pane) the stalemate continues in Nifty as Index continues to remain range-bound. Nifty is already touching the rising trend line which is also a great support level. The Bollinger bandwidth is one of the narrowest in more than a year. This contraction in volatility cannot remain forever and sooner or later the rubber band will snap. Nifty has hit a rising trend line coming up from the lows of April. 22 and so Nifty is at a strong support level.
Nifty needs to break above 15950 for the rally to continue. At the time of this writing international equity markets rallied sharply on Friday. We remain hopeful that the breakout will be on the side. On the lower end support is at 15550-16000. As long as support holds we expect the stalemate will resolve with a break on the upside. If this happens a rally to 16200-16300 is likely.
On the weekly time frame, CNX realty is breaking above major resistance level. This could very well be a historical breakout and the prices of Realty sector stocks could see a renewed buying interest. Historically the zone at 366-370 was a substantial barrier and prices have reversed thrice from this level. The rule is that the prices usually go through the fourth time.
On the weekly price action, CNX Realty shows a sharp rally and it is currently at a barrier below 366-370. If the price does manage to move above the resistance at 366-370 we should see a rally to 400+ levels over the next couple of weeks. RSI has gain moved above 70 and this could be a sign of a strong move ahead With Nifty also poised to move higher Realty stocks could be major gainers over the weeks.