India's benchmark Sensex stock index may have broken out to new highs, but for a sense of what's next for the share market, investors might want to take cue from the broader Nifty index.
While the Nifty Index is lagging, it tends to be more reliable for tracking the behavior of the Indian market. The weekly Nifty chart gives an overview of market behavior and provides a method for setting the breakout target.
The first feature of the weekly Nifty chart is the long-term trading band consolidation. The upper level of the band is near 6250, while the lower level is near 4610. The index has oscillated around the central trading band between 5200 and 5680 for almost three years. This is an important behavior because it provides a method for calculating breakout targets.
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The second feature of the Nifty chart is the width of the trading bands, which are around 507 index points wide. The width is projected above the upper edge of the trading band to give an upside target near 6780. If the breakout above 6250 continues then 6780 is the next potential resistance level, but that's a big if.