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Nifty: 17382

Technical Outlook

* On expected lines, index resolved higher and approached our earmarked target of 17500. However, profit booking from higher levels dragged index below past two sessions low of 17200. Eventually, fag end buying demand helped index to recoup intraday losses and settle on a flat note. As a result, daily price action formed a bear candle with long lower shadow, highlighting supportive efforts at elevated levels

* The index has been taking breather over past couple of sessions after 15% rally as it approached upper band of downward slanting channel amid overbought condition of daily and weekly stochastic oscillator (currently placed at 91 and 96, respectively). We believe, a mild profit booking from hereon would make index healthy and set the stage for eventually challenging higher band placed around 17550 and gradually head towards 17900 as it is 80% retracement of entire decline off October 2021 to June low (18600-15200). Hence, any temporary breather should not be construed as negative instead dips should be utilised as an incremental buying opportunity

* Since 2008, on six occasions the index has formed a durable bottom after Long term sentiment indicator measured by percentage of stocks above 200 DMA (Nifty 500 universe) has touched the extreme low reading below 15. Subsequent rallies in each of these instances measured minimum 20% from lows. In current scenario, index is bouncing after recording bearish extremes on sentiment indicator that augurs well for next leg of up move

* Structurally, the formation of higher high-low underpinned by broader market participation makes us confident to revise support base at 16900 as it is 50% retracement of most recent rally (16438-17407) coincided with the positive gap seen on July 29, 2022 (16930-17018).

* The midcap index has relatively outperformed against benchmark supported by improving market breadth which is measured by percentage of stocks above 50 day moving average that have seen significant jump with a current reading of 86% compared to June reading of 22%, indicating broad based nature of rally that bodes well for durability of ongoing pullback

* In the coming session, index is likely to open on a positive note tracking mixed global cues. We expect index to trade with a positive bias amid elevated global volatility. Hence, use intraday dip towards 17320-17355 for creating long position for the target of 17439

NSE Nifty Weekly Candlestick Chart

Nifty Bank: 37755

* The daily price action formed a bear candle which engulfed last two sessions price action signaling breather around the 38000 levels after a sharp up move of 2000 points in just six sessions .

* A firm closing above 38000 levels will open upside towards 38700 levels in the coming sessions being the confluence of high of April 2022 and the 61 . 8 % retracement of the entire decline (41829 -32155 )

* The recent sharp up move has lead to daily and weekly stochastic at an overbought territory (currently placed at 81 and 94 , respectively), indicating possibility of temporary breather at higher levels cannot be ruled out . We believe any retracement of the recent up move from here on would make the market healthy and offer incremental buying opportunity .

* Bank Nifty has relatively outperformed the benchmark index during the market correction and the subsequent pullback as the Bank Nifty/Nifty ratio chart has registered a breakout above the falling supply line joining highs since January 2021 highlighting strength and continuation of the outperformance

* The formation of higher high -low on the weekly chart makes us confident to revise the support base higher towards 36000 levels as it is the confluence of the recent breakout area and the 50 % retracement of the current up move (34463 -37939 )

In the coming session, index is likely to open on a positive note amid firm global cues . Volatility is likely to remain high in today’s session on account of the RBI monetary policy outcome . Bias remain positive, hence after a positive opening use intraday dips towards 37600 -37680 for creating long position for the target of 37930 , maintain a stoploss at 37480

Nifty Bank Index – Daily Candlestick Chart

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