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Nifty to challenge the upper band of consolidation at 18200

Technical Outlook

* The Nifty started the week on a positive note and broadly traded in the Monday’s trading range (18100-17800) throughout the week. In the process, on four out of five sessions Nifty closed above psychological mark of 18000 despite global volatility and managed to hold 50 days EMA. The weekly price action formed a bull candle carrying higher high-low, indicating extended pullback

* The formation of higher peak and trough on the monthly chart signifies broader positive structure is intact that makes us believe, index would eventually resolve higher and retest the all-time high of 18600 by December 2021. Key point to highlight over past 18 months is that, price-wise Nifty has maintained the rhythm of not correcting for more than 7-9% while sustaining above 50 days EMA and timewise intermediate corrections have got arrested within four weeks. As index has already corrected 5.5% over past three weeks, we expect index to hold 17500 and eventually challenge the life highs

* In the coming week, we expect index to consolidate in 18200-17700 range which would offer incremental buying opportunity as index approaches price/time wise maturity of correction. Hence, dips should be capitalised on to accumulate quality stocks

* The broader market indices have formed a higher high-low on the weekly chart after forming a base above 50 days EMA that has been held since June 2020, highlighting robust price structure. We expect Nifty midcap and small cap indices to extend their consolidation amid lack of faster retracement on either sides and witness stock specific performances 

* Sectorally, Capital goods, Telecom, Infra are outperformers while BFSI and IT provide favourable risk-reward setups

* In large caps we prefer Reliance, HDFC, SBI, Bharti Airtel, L&T, Tata Motors, HDFC Life, Tech Mahindra, DLF, while in Midcaps we like ABB, L&T Infotech, Bharat electronics, Bata India, TCNS Brands, Carborandum Universal, Gateway Distriparks, Gujarat Fluorochem, Phoenix Mills, Polycab, Mahindra Holidays, Pricol.

* Structurally, the higher base formation above 50 days EMA signifies robust price structure that makes us believe that ongoing breather would find its feet around 17500-17600 range as it is confluence of: a) 50 days EMA at 17650 b) October 2021 low is placed at 17452

In the coming session, the index is likely to open on a positive note amid positive global cues. We expect, index to trade with a positive bias while maintaining higher high-low. Hence, use dip towards 18130-18162 for creating long position for target of 18248

NSE Nifty Daily Candlestick Chart 

Nifty Bank: 38733

Technical Outlook​​​​​​​

* The weekly price action formed a bear candle with a small lower shadow as it rebounded taking support around the vicinity of the 50 days EMA placed around 38390 levels

* Key observation is that the index since April 2020 has not corrected for more than four weeks barring one instance while 50 days EMA has acted as strong support during each of the corrective phase . In the current scenario with three weeks of decline already behind us, we expect the index to maintain the rhythm and form a higher base around 50 days EMA (currently placed around 38390 )

* In the upcoming truncated week, we expect index to continue with its healthy consolidation in the broad range of 38200 -40000

* We believe the current breather should not be seen as negative instead it should be capitalized to accumulate quality banking stocks for the next leg of up move . Buying on dips strategy has worked well on multiple occasions in the last 18 months

* The short term support base for the index is placed at 38200 -38400 levels being the confluence of the following technical observations :

* 61 . 8 % retracement of the recent up move (36876 -41829 ) placed at 38620 levels

* the upper band of the recent seven months range breakout area

* the rising 50 days EMA is also placed at 38390 levels

* In the coming session, index is likely to open on a positive note amid firm global cues . We expect, the index to continue with its pullback from the crucial support area of 50 days EMA . Hence after a positive opening use intraday dips towards 38690 -38760 for creating long position for the target of 39030 , maintain a stoploss of 38580

Nifty Bank Index – Weekly Candlestick Chart

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