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Indian markets could open flat, in line with flat Asian markets today and despite positive US markets on Wednesday.- HDFC Securities

U.S. stock indexes closed further in record territory Wednesday, with the Dow Jones Industrial Average extending its gains to a fourth straight day. The move higher for equities comes as strong second-quarter corporate earnings offset doubts about the pace of economic recovery, even with the coronavirus delta variant limiting consumer and business activity in some countries.

Investors pushed equities higher Wednesday, with the S&P 500 index putting in its 51th all-time high of 2021 and the Nasdaq Composite booking its 30th record close of the year.

South Korea’s central bank raised interest rates on Thursday, in a decision that was expected as financial risks heat up despite the virus threat. The Bank of Korea raised its policy rate by 25 basis points to 0.75%, becoming the first developed economy to hike rates in the pandemic era.

Asian stocks were flat to slightly lower Thursday as traders await more clues about the regulatory outlook in China as well as the Federal Reserve’s approach to paring stimulus. Fed officials attend the Jackson Hole Economic Policy Symposium from Thursday through Saturday. Nifty ended flat after making a new all time high before noon on Aug 25. At close, Nifty was up 0.06% or 10 points to 16635.

Nifty lost the intra day gains on Aug 25 and closed almost flat after making a new all time high. The high-low of Aug 25 becomes important from a near term perspective. Advance decline ratio ended above 1:1 raising hopes of broader market recovery. Lower than average volumes reflect hesitation on the part of participants to enlarge their commitment on either side. A breakout of the 16712-16618 band on the Nifty will determine the near term trend of Nifty.

Daily Technical View on Nifty

Observation: Markets ended with marginal gains on Wednesday. The Nifty finally gained 10.05 points or 0.06% to close at 16,634.65.

Broad market indices like the BSE Mid Cap and Small Cap indices gained more, thereby out performing the Sensex/Nifty. Market breadth was positive on the BSE/ NSE.

Zooming into the 15 minute chart, we can see that the Nifty opened with an upgap and touched a new life high in the morning session. Selling pressure however emerged in the afternoon session and pulled the index lower to finally end with marginal gains.

The short term trend of the Nifty nevertheless remains up and traders will need to watch if the Nifty can hold above the immediate support of 16608 for a retest of the life highs; else we could see a short term correction towards the next support of 16592.

On the daily chart, the Nifty continues to hold above a rising trend line that has held the important lows of the last few months. This implies that the index remains in an intermediate uptrend. The index also continues to trade above the 20 and 50 day SMA, which gives further evidence of an uptrend.

And recently, Nifty has broken out of the 15451-15962 trading range, which is an encouraging signal for the uptrend to continue. Upside target implications are at 17000. However, we remain open to the possibility of the Nifty correcting towards the 16286 levels in the coming sessions. Our bearish bets are off if the Nifty manages to take out the 16713 levels.

Conclusion: The short term trend of the Nifty remains up despite the correction seen from the highs. Traders will need to watch if the Nifty can hold above the immediate support of 16608 for a retest of the life highs; else we could see a short term correction towards the next support of 16592. On the larger daily timeframe, Nifty has broken out of the 15451-15962 trading range and also trades above the 20 and 50 day SMA, which gives further evidence of the uptrend to continue towards the 17000 levels.

However, we remain open to the possibility of the Nifty correcting towards the 16286 levels in the coming sessions. Our bearish bets are off if the Nifty manages to take out the 16713 levels.

Nifty – Daily Timeframe chart

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