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Nifty: 16125

Equity benchmarks concluded the choppy session on a subdued note tracking muted global cues. The Nifty ended the session at 16125, down 90 points or 0.5%. Market breadth remained negative with A/D ratio of 1:3. Sectorally, financials, auto relatively outperformed while IT, metal, realty continued to underperform.

Technical Outlook

* The index witnessed a lackluster session as Nifty majorly oscillated in 150 points range throughout the session. The, daily price action formed a bear candle carrying lower high-low, indicating corrective bias wherein past two sessions breather retraced 50% of Friday’s up move. In the process, Daily cash NSE turnover (|51600 crores)remained below its one month average of | 57500 crores

* The index has been confined within the broader range of 16400-15700 over past eight sessions wherein stock specific action has been observed amid ongoing global volatility. Going ahead, we believe healthy retracement of last leg of up move would help index to form a higher base in the vicinity of 15800-16000 and gradually surpass the immediate hurdle of 16400 levels and pave the way towards 16800 in coming weeks. However, bouts of volatility would play a pivotal role amid ongoing global uncertainty that would make move towards 16800 in a nonlinear manner. Hence, extended breather from here on should be capitalised on to accumulate quality stocks in a staggered manner as we do not expect the Nifty to breach the key support threshold of 15600. Our earmarked target of 16800 is based on following observations:

* a) 200 day’s EMA placed at 16770

* b) 50% retracement of the entire April-May decline (18115-15735)

* Structurally, over past two decades, on 16 out of 20 occasions despite transitory breach (not greater than 5%) of 52-week EMA (currently 16600) index has generated decent returns in subsequent 3 month and 6 months. In current scenario 5% from 52 weeks EMA is placed at 15700 which has been held on multiple occasions over past two weeks. We expect this rhythm to be maintained as strong support is placed in the range of 15600-15400 as it is confluence of:

* a) 61.8% retracement of CY21 rally b) equality of previous down leg of 14% projected from April high of 18115

* The broader market indices are forming a contracting pattern as over past two weeks Nifty midcap and small cap indices are trading within mid weeks of May. We expect both indices to prolong the consolidation amid oversold conditions and form a higher base wherein stock specific action would prevail

* In the coming session, index is likely to open on a positive note tracking positive Asian cues. We expect index to trade with a positive bias while sustaining above Tuesday’s low of 16035. Hence, use intraday dip towards 16074-16108 for creating long position for the target of 16194

NSE Nifty Daily Candlestick Chart

Nifty Bank: 34290

The Bank Nifty traded in a range with positive bias and closed the session marginally higher by 0 . 1 % amid mixed Asian cues . Stock specific action was witnessed on Tuesday session on both PSU and private banking space . The bank nifty closed the session at 34290 levels up by 42 points or 0.1% on Tuesday.

Technical Outlook

* The daily price action formed a high wave candle which mostly remained contained inside Monday’s high -low range signaling range bound trade after last week strong technical pullback .

* Going ahead, we expect index to consolidate and form a base in the broad range of 34800 -33300 levels . Buying on dips towards 33300 -33500 levels should be rewarding as strong support exist around 32000 -32500 levels .

* On the higher side a firm closing above 34800 will lead to a gradual up move towards 36000 levels in a nonlinear fashion being the confluence of the 200 days EMA (placed at 35948 ) and the 50 % retracement of the entire recent decline (38765 -33002 ) .

* The index has key support placed around 32000 -32500 levels as it is :

* (a) March low placed at 32155

* (b) The value of the rising trendline joining lows of April 2021 (30405 ) and March 2022 (32155 )

* Among the oscillators the weekly stochastic is seen rebounding from the oversold territory and is currently placed at a reading of 17 signaling an impending pullback in the coming weeks.

In the coming session, index is likely to open on a positive note amid firm Asian cues . We expect it to trade in a range with positive bias while holding above last two sessions lows 34100 levels . Hence, after a positive opening use intraday dips towards 34160 -34230 for creating long positions for target of 34490 , maintain a stoploss at 34040

Nifty Bank Index – Weekly Candlestick Chart

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