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Nifty:16631

Technical Outlook

• The Nifty started the monthly expiry week on a subdued note and oscillated in 140 points range. As a result, daily price action formed a bear candle carrying lower high-low, indicating breather after six sessions up move in a row.

• The index has rallied ~900 points over past six sessions that hauled daily stochastic oscillator in overbought condition. Thus, healthy retracement from hereon cannot be ruled out wherein stock specific action would prevail. Eventually, we expect index to resolve higher and gradually head towards the psychological mark of 17000 in coming sessions as it is 61.8% retracement of April-June decline (18114-15183). However, we believe, the move towards 17000 would not be in a linear manner as bouts of volatility cannot be ruled out owing to U.S Fed meet and monthly expiry in coming week amid overbought conditions of daily stochastic oscillator (currently placed at 95). Thus, temporary breather from hereon should not be construed as negative instead dips should be capitalised as incremental buying opportunity.

• Structurally, the breadth indicator, measured by percentage of stocks above 50 day moving average have jumped from 22% at the beginning of July to current reading of 75% indicating broad based nature of rally that augurs well for durability of ongoing up move which makes us confident to revise support base upward at 16300 as it is confluence of: a) 50% retracement of past five days move (15858-16752) b) as per change of polarity concept past two weeks identical high of 16275 would now act as key support

• On the broader market front, the benchmark index Nifty and midcap index have approached their 200 days EMA, however small cap index is still 6% away from its 200 days EMA. Thus, we expect catch up activity to be seen in the broader market. Hence, focus should be on accumulating quality mid and small caps amid ongoing earning season

• In the coming session, index is likely to open on a flat note tracking muted global cues. We believe, healthy retracement from hereon would make market healthy. Hence, use intraday dip towards 16530-16565 for creating long position for the target of 16648

NSE Nifty Daily Candlestick Chart

Nifty Bank: 36726

Technical Outlook

• The daily price action formed a high wave candle with a small real body and long shadows in either direction signaling breather after the last week strong up move

• The rallies are getting bigger in magnitude while declines are smaller and short lived indicating improving price structure, which makes us confident to revise target to 37500 levels in the coming weeks being the 80 % retracement of the previous major decline (38765 -32290 )

• The up move towards 37500 levels is likely to be in a non -liner manner bouts of volatility owing to U . S Fed meet and monthly expiry in current week cannot be ruled out . However, only a decisive close below previous session low (36465 ) would lead to a breather, else continuation of upward momentum . However, temporary breather from hereon should not be construed as negative instead dips should be capitalised as incremental buying opportunity

• Key observation in the recent market correction and during the last five -week pullback is that the Bank Nifty is relatively outperforming the Nifty . It is also highlighted in the Bank Nifty/Nifty ratio chart as it is seen breaking above the falling supply line joining highs since January 2021 highlighting strength and continuation of the current outperformance

• The formation of higher high -low on the weekly chart makes us confident to revise the support base higher towards 35400 levels as it is the confluence of the 200 days EMA and the 61 . 8 % retracement of the last week up move (34463 -36823 )

• Among the oscillators, the weekly stochastic remain in strong up trend thus supports the overall positive bias in the index In the coming session, index is likely to open on a soft note amid muted global cues . We expect the index to trade in a range while consolidating its recent gains ahead of the FOMC meeting . Hence use intraday dips towards 36390 -36470 for creating long position for the target of 36730 , maintain a stoploss at 36280

Nifty Bank Index – Weekly Candlestick Chart

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