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Published on 26/11/2020 11:45:59 AM | Source: ICICI Direct

The market breadth was favouring declines as profit booking was broad based after strong rally - ICICI Direct

Posted in Market Outlook| #Market Outlook #ICICI Direct

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NSE (Nifty): 12858

Technical Outlook

* Equity benchmarks witnessed notable profit booking ahead of monthly expiry. The Nifty settled at 12858, down 1.5% or 196 points. The market breadth was favouring declines as profit booking was broad based after strong rally. The Nifty small cap index performed relatively better, with a cut of 1%. All major sectors barring oil & gas and PSU banks ended in the red.

* The daily price action formed a sizeable bear candle that engulfed past two session’s gains after the index almost achieved our target of 13200, on expected lines.

* Profit booking emerged in the vicinity of our target area, after a 1588-point rally in just 17 trading sessions led the Nifty to overbought conditions in multiple time frames. The index lost 320 points from the day’s high (13145) and in the process retraced past three session’s gains (12730-13145) by 80%, which coincides with 10 day EMA (12800)

* Going forward, if it holds Wednesday’s low (12800) on a closing basis that would keep pullback options open towards 13200. Only a decisive breach below Wednesday’s low and 10-day EMA at 12800 would indicate extended breather amid stock specific action

* The broader markets have witnessed acceleration of upward momentum over past few weeks led by midcaps. We expect small cap index to catch up and challenge its CY19 highs, which is 5% away. Therefore, any temporary breather would present incremental buying opportunity

* Structurally, the higher peak and trough on a larger degree charts (weekly and monthly) combined with robust market breadth makes us confident to retain strong support base at 12500 as it is confluence of: a) 38% retracement of current up move (11535- 13145), at 12530 b) November 10 positive gap (12461-12475)

* The index held its 10-day EMA twice in November and also maintained rhythm of not ending negative for more than a single session. In coming session, if it holds Wednesday’s low (12844) that would lead to pullback attempt amid expiry induced volatility. Hence, use intraday dips towards 12855-12880 for long position for target of 12965

 

NSE Nifty Daily Candlestick Chart

 

Bank Nifty: 29196

Technical Outlook

* The Bank Nifty witnessed profit booking on Wednesday ahead of the monthly expiry and closed lower by ~ 2 % on Wednesday . The profit booking was mainly lead by the private banking stocks after the recent strong outperformance, while the under performing PSU bank witnessed a pullback . The bank Nifty ended the session at 29196 down by 540 points or 1 . 8 % 

* The daily price action formed a bearish engulfing candle as it gave up its entire previous session gains . The index on Wednesday witnessed profit booking after testing the psychological 30000 levels . Holding above Wednesday’s low (29132 ) will keep pullback option open . Failure to do so will lead to extended profit booking after the recent strong rally

* Going ahead, we expect a breather post the recent stupendous rally of more than 26 % in the last three weeks . The index is expected to consolidate and form a higher base in the broad range of 28000 -30500 in the coming sessions

* We believe as the overall structure in the index remain firmly positive, any breather on account of the overbought weekly stochastic (currently at 90 ) should not be seen as negative instead it should be capitalised as an incremental buying opportunity

* The index has major support around 28000 levels being the confluence of the (a) 38 . 2 % retracement of the previous rally 23612 to 30197 and the rising 20 days EMA currently placed at 27900 levels

* On the higher side 30200 -30500 is likely to act as stiff hurdle being the upper band of the rising channel in placed since March 2020

* In the coming sessions, the index is opening positive note on back of firm global cues . We expect the index to hold Wednesday low (29148 ) and lead to a pullback .

* Hence after positive opening use intraday dips towards 29150 -29210 for long position for target of 29430 with a stoploss of 29040 Among the oscillators the daily stochastic remain in down trend and is currently placed near the neutral reading of 50 signalling continuation of a breather after the recent sharp up move

 

Bank Nifty Index – Daily Candlestick Chart

 

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