Published on 16/11/2019 12:23:26 PM | Source: ICICI Direct

Technical Strategy Nifty to challenge life-time high of 12100 - ICICI Direct

Posted in Market Outlook| #Market Outlook #ICICI Direct

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Target of 11600 conquered, index eyeing life-time high of 12100

Technical Outlook

Equity benchmarks extended gains for a second consecutive month gaining 1%, buoyed by improved market sentiments aided by corporate tax rate cut. The Nifty behaved in line with our expectations as the initial dip led to a higher bottom formation around 11100 while the index achieved our intermediate target of 11600. Going ahead, we expect the index to resolve out of intermediate hurdle of 11700 and challenge the life-time high of 12100 in coming months. The ongoing healthy consolidation post a sharp up move of ~10% signifies a robust price structure, aiding the index to set the launch pad for acceleration of upward momentum towards 12100. In the process, we do not foresee the index breaching the key support threshold of 11300. Therefore, dips should be capitalised to accumulate quality stocks amid the Q2FY20 earning season. The midcap has formed a strong base on maturity of price/time wise correction, as over the past 21 month index retraced 61.8% of preceding 22 months rally. Slower pace of retracement signifies robust price structure auguring well for the index to rally 5% from here on and challenge the long term falling trend line at 17000. We recommend that investors buy quality midcap stocks as the broader market looks lucrative to participate in the impending technical pullback


Launch pad set to challenge life-time high of 12100

Technical Outlook

* Equity benchmarks maintained the rhythm of forming a higher low (as shown in chart) since elevated buying demand emerged from 61.8% retracement of sharp up move ~10% seen in the middle of September 2019. The ongoing structural improvement makes us believe the index is set to challenge the all-time high of 12100 in coming months o

* The index resolved out of downward sloping trend line (drawn adjoining subsequent high off all-time high of 12103), indicating termination of secondary corrective phase, auguring well for acceleration of upward momentum towards 12100 as it is:

  • price parity of sharp up move ~10% (seen post corporate tax cut) is placed around 12115
  •  All-time high placed at 12103

* Monthly stochastic oscillator recorded bullish crossover after bouncing form its key support area of 35, indicating positive bias


Nifty Midcap Index: Base formation post price/time wise correction maturity, offers favourable risk reward

Technical Outlook

* The strong base formation at key support threshold of 15200 (price/ time maturity), augurs well for Nifty Midcap index to resolve higher and witness 5% up move in coming months

* We believe the index has undergone a strong base formation after approaching price/time wise correction, as over past 21 months (21 is a key Fibonacci number) the index has retraced 61.8% of preceding 22 months rally (11190 – 21840), at 15260, indicating slower pace of retracement

* The aforementioned evidence signifies that base formation post slower pace of retracement offers fresh entry opportunity with favourable risk reward set up. Hence, we advise investors to accumulate quality midcap stocks amid Q2FY20 earning season


Bank Nifty: Current rally to extend towards 30800

Technical Outlook​​​​​​​

* The index maintained positive bias and closed higher for a second consecutive month. We expect the Bank Nifty to trade with positive bias in the coming month and head towards 30800 levels as it is the confluence of the September 2019 high and 80% retracement of the entire decline (31783-26560)

* Bank Nifty on monthly scale formed an inside bar pattern signalling consolidation after 15% rally post corporate tax cut announcement. The index in the process formed a higher base (at 80% retracement of the previous rally (26643-30801)) highlighting positive price structure

* Sharp up move in the second half of the month saw the index registered a breakout above the last three weeks falling trendline signalling a resumption of primary up trend

* The current up move has seen broad based participation across PSU and private banking stocks signalling strength. Hence we do not foresee the index breaching the crucial support area of 28400-28600


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