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Published on 22/07/2021 10:44:24 AM | Source: ICICI Direct

The Nifty midcap and small cap indices took a breather after past four weeks sharp up move - ICICI Direct

Posted in Market Outlook| #Market Outlook #ICICI Direct

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NSE (Nifty): 15632

Technical Outlook

* The daily price action formed a bear candle carrying lower highlow, indicating extended correction as index breached past three weeks low (15633) on a closing. Even the resilient broader market indices succumbed to the selling pressure as Nifty midcap and small cap lost 1.4%, each

* Contrary to our expectation, breakout above upper band of consolidation (15900) has not materialised, indicating prolonging of ongoing consolidation in the range of (15900-15500). Going ahead, we believe either side breakout would dictate further directional bias. Meanwhile, consolidation (15900-15500) with stock specific action would continue amid progression of Q1FY22 earning season

* Key point to highlight since mid-March 2021 is that, the index has not corrected for more than four consecutive sessions. In the current scenario, the Nifty has already corrected over the past three sessions in a row. Hence, we expect the index to maintain the same rhythm by arresting ongoing corrective phase in couple of sessions. In the near term, upside will be capped at 15900 as index failed to sustain above upper band of consolidation on fifth occasion in last five weeks, highlighting key resistance at 15900

* The Nifty midcap and small cap indices took a breather after past four weeks sharp up move. We believe, temporary breather from hereon would help broader market to cool off the overbought condition and form a higher base that would pave the way for next leg of up move

* Structurally, we believe the ongoing corrective phase would get anchored around key support zone of 15600-15500, which has been held despite recent global volatility. We do not expect 15500 to be breached as it is confluence of:

* a) 80% retracement of June-July rally (15450-15962), at 15550

* b) 10 weeks EMA placed at 15572 In the coming session, index is likely to witness gap up opening tracking buoyant global cues. We expect index to trade with a positive bias amid elevated volatility owing to weekly derivative expiry. Hence, use intraday dip towards 15670-15695 to create long for target of 15783

NSE Nifty Daily Candlestick Chart

 

Nifty Bank: 34415

Technical Outlook

* The daily price action formed a bear candle with a lower high - low signaling continuation of the corrective decline for third consecutive session . The index contrary to our expectation breached the 50 days EMA (currently placed at 34786 ) . The Bank Nifty after the recent sharp decline is currently placed near the lower band of the last seven weeks consolidation range placed around 34000 levels .

* Key observation is that the index since April has not corrected for more than four consecutive sessions, with three sessions of decline already behind us, we expect the index to rebound in the coming couple of sessions .

* Going ahead, we expect the index to hold above the lower band of the last seven weeks range placed around 34000 levels and witnessed a gradual pullback in the coming weeks towards the upper band of the range placed around 35800 levels

* The index has witnessed a shallow retracement as it has retraced just 50 % of its May rally (32115 -35810 ) over past seven weeks highlighting a positive price structure and a higher base formation

* We advise to capitalize the current breather as an incremental buying opportunity in quality large and mid cap banks as the overall structure remains positive

* The index has support base at 34000 -33800 levels being the confluence of the following technical observations :

* (a) The lower band of the last seven weeks consolidation range placed around 34000 levels

* (b) The rising 100 days EMA is also placed at 33958 levels

* In the coming session, index is likely to witness gap up opening tracking strong global cues . We expect the index to witness a rebound after last three sessions sharp decline . Hence after a positive opening use intraday dips towards 34580 -34640 , for creating long position for target of 34870 , maintain a stoploss of 34470

Nifty Bank Index – Daily Candlestick Chart



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