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Nifty : 16661

Technical Outlook

* On expected lines, index logged a resolute breakout above 3 weeks high of 16400 underpinned by a breakaway gap (16352- 16528) and inched northward during the session. As a result, daily price action formed a sizable bull candle carrying higher high-low, indicating extension of pullback rally. In the process, India VIX (which gauge the market sentiment) has cooled off and settled at two weeks low (on a closing basis)

* The cool off in India VIX and improvement in market breadth coupled with across sector participation signifies rejuvenation of upward momentum that augurs well for extension of ongoing pullback towards 16800 in coming sessions. Thus, temporary breather from here on should be capitalised on as incremental buying opportunity as we expect buy dips strategy to remain fruitful for investors. Our target of 16800 is based on following observations: a) 200 day’s EMA placed at 1675 b) 50% retracement of the entire April-May decline (18115-15735)

* The formation of higher high-low after 7 weeks corrective phase, signifies pause in downward momentum. The across sector traction displays broad based participation that augurs well for durability of ongoing up move. This improvement in upward momentum makes us confident to revise support base at 16100 as it is 61.8% retracement of current up move (15735-16695)

* Structurally, index has maintained the rhythm of witnessing buying demand in the vicinity of 52 weeks EMA, observed over past two decades. Despite elevated global volatility, Nifty managed to hold the key support threshold of 15600 on multiple occasions and eventually staged a bounce highlighting broader positive structure remains intact

* Broader market indices managed to hold early May panic lows and recouped intra-month losses. Going ahead, follow through strength above upper band of past 3 weeks range would be required for extended pullback, else prolongation of consolidation amid stock specific action that would help Nifty midcap and small cap indices to undergo a base formation

* In the coming session, index is likely to open on a flat note tracking mixed Asian cues. We expect index to trade with a positive bias while maintaining higher high-low formation. Hence, use intraday dip towards 16535-16567 for creating long for target of 16655.

NSE Nifty Daily Candlestick Chart

Nifty Bank: 35827

Technical Outlook

* The daily price action formed a high wave candle which maintained higher high -low and a small bullish gap below its base (35695 -35748 ) signaling continuation of the positive bias after breaking above the falling supply line joining highs of the last seven weeks signaling a reversal of the recent corrective trend and resumption of up move .

* Going ahead, we expect the index to maintain positive bias head towards 36500 levels in a nonlinear fashion being the 61 . 8 % retracement of the April -May decline (38765 -33002 ) . Buying on dips towards 35000 -35200 levels should be rewarding as we expect index to hold above last week low (34115)

* Key observation in the recent market correction is that the bank Nifty is relatively outperforming the Nifty as it is seen rebounding taking support near the 80 % retracement of the March up move (32156 -38765 ) and has already formed a higher high -low in the weekly time frame . Bank Nifty/Nifty ratio chart is seen reversing from last 15 months falling channel highlighting strength and continuation of the current outperformance

* The index has formed a higher high -low on the weekly time frame which make us confident to revise the key support base higher towards 34000 levels as it is the confluence of :

* (a ) 61 . 8 % retracement of the current up move (33002 -36083 ) placed at 34100

* (b) Last week low is also placed at 34116 levels

* Among the oscillators the weekly stochastic is in up trend thus supports the positive bias in the index.

In the coming session, index is likely to open on a flat note amid muted Asian cues . We expect it to trade in a range with positive bias . Hence use intraday dips towards 35650 -35720 for creating long position for the target of 35980 , maintain a stoploss at 35530.

Nifty Bank Index – Weekly Candlestick Chart

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