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Sensex (59575) / Nifty (17765)

During the last week, Nifty did correct by nearly a couple of percent; which certainly cannot be considered as a major damage. Also it did close above the key support on a weekly basis but the way overall things are positioned, we will not be surprised to see it surrendering (17700) in the first half of this week itself. Since last few days, we have been mentioning the ‘Head and Shoulder’ pattern on the daily chart of Nifty which was in process. After Thursday’s close, the final (right) shoulder of this pattern is completed and prices are placed exactly at the ‘Neckline’ point of the same. A sustainable move below 17700 (which seems likely) would activate the pattern and as a result of this, we could see a fresh leg of correction in coming days. After this, next levels to watch out for would be 17450 and 17200, where one needs to reassess the situation. On the flipside, if Nifty manages to hold 17700 and move higher first, then 18000 – 18200 are to be considered as strong hurdles, which as of now we do not expect to get surpassed in the near future. The major culprit during the last week’s correction was the continuous weakness in banking and metal counters. Although banking index is nearing its strong support zone, we do not expect any major bounce back in this space.

Apart from this, the broader market looked a bit tentative on Thursday and the way it’s closed; things do not augur well for the bulls. To summarize, we advise traders to remain light which we have been advocating of late and even if one wants to accumulate stocks with a broader perspective, one needs to be a bit patient as we expect some reasonable prices to come in next few days.

Nifty Daily Chart

Nifty Bank Outlook - (37976).

The truncated week began on a cheerful note and then the banking index touched 39100 plus levels in the early morning trade. After posting these highs index attracted fresh selling pressure which got extended in next three sessions without any look back to first breach 38300-38400 on Tuesday and then test 37700-37800 on Thursday. Finally, due to some respite in the latter half on the weekly expiry day, we concluded the week tad below 38000.

As mentioned in our recent commentaries, we were not very optimistic especially on this space and as expected it remained one of the major culprit to drag the benchmark index towards 17700. During this chores of action, we saw the banking index achieving the first target of 37700 and any further damaged below 37400-37500 shall not be a very good indication for bulls. Thus, all eyes on this space for the coming monthly expiry week; one should keep a close tad on the above mentioned levels. On the higher side, 38200-38400 shall be looked as immediate supply zone.

Nifty Bank Daily Chart

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