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Nifty to extend rally towards 18200 in coming weeks

Technical Outlook

* In line with our view, the index continued to march northward and surpassed our target of 17600. As a result, weekly price action formed a bull candle carrying higher high-low, signifying continuance of upward momentum

* Going ahead, we expect the Nifty to maintain ongoing up move and head towards 18200 in coming weeks. Our constructive thesis on the market is based on following observations: a) The Nifty and Bank Nifty exhibited follow through strength after recording falling channel breakout. Thereby confirming conclusion of corrective phase b) Since June 2020, on multiple occasions elevated buying demand emerged from 5 months’ average that paved the way to challenge life highs in subsequent months. In Current scenario as well index rebounded from 5 months’ average. Thereby offering fresh entry opportunity from medium term perspective c) The across sector participation along with improving market breadth augurs well for longevity of the bull trend

* For the coming week, downside remains cushioned around strong support of 17500 levels. Thereby any cool off from hereon should be capitalized to accumulate quality stocks to ride next leg of up move towards 18200 as it is confluence of:

* a) 80% retracement of entire decline since October 2021 (18604-16410) is placed at 18165 b) November 2021 high is placed at 18210

* We expect IT, BFSI, auto sectors to outperform, while Metal & PSU provide favourable risk-reward 

* In large caps we like Reliance, TCS, State Bank of India, Bajaj Finance, HDFC Life, Hindalco, Maruti, DLF, Ambuja Cement while in Midcaps we prefer Federal Bank, Canara Bank, Oreint Cement, Jamna Auto, Vardhman Special Steels, LT Technology Services, Aditya Birla Fashion and Retail, Vinati Organics, Mahindra Logistic, SKF India

* The broader market indices are sustaining above three months falling channel breakout area, indicating robust price structure. Meanwhile, improving market breadth augurs well for durability of current up move as 60% of stocks of Nifty 500 are sustaining above 50 day EMA compared to mid-December reading of 49%

* Structurally, the formation of higher high-low on the weekly chart signifies positive bias is intact, that makes us confident to revise support base in the range of 17400-17500 as it is confluence of: a) 61.8% retracement of current up move (17146-17944) b) current week’s low is placed at17383

* In the coming session, the index is likely to open on a positive note amid mixed global cues. We expect the index to continue with its positive momentum while maintaining higher high-low. Hence use intraday dip towards 17850-17882 for creating long position for target of 17967.

NSE Nifty Weekly Candlestick Chart

Nifty Bank: 37739

Technical Outlook

* The weekly price action formed a sizable bull candle with a higher high -low and a firm close above the falling channel containing last two months’ price decline signaling rejuvenation of upward momentum . The current up move of more than 3500 points is the largest in the entire decline of the last two months highlighting strength

* Going ahead, we expect the index to maintain positive bias and gradually extend the current up move towards 38800 levels in the coming weeks as it is the 61 . 8 % retracement of the entire decline (41829 -34018 )

* In the process, bouts of volatility cannot be ruled out . However, any dip from hereon should not be construed as negative instead capitalise it as incremental buying opportunity as we expect strong buying demand exists around 36500 levels .

* The index has support around 36500 levels being the confluence of the following technical observations :

* (a) 38 . 2 % retracement of the current up move (34233 -38134 )

* (b) the rising 100 days EMA currently placed at 36700 levels

* Among the oscillators the weekly stochastic is in uptrend and is seen rebounding taking support at its three periods average thus validates positive bias in the index in coming weeks

* In the coming session, index is likely to open on a positive note amid mixed global cues . We expect the index to continue with its positive momentum while maintaining higher high -low . Hence after a positive opening use intraday dips towards 37820 -37890 for creating long position for the target of 38130 , maintain a stoploss at 37710.

Nifty Bank Index – weekly Candlestick Chart

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