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NSE (Nifty): 14790

Technical Outlook

* Equity benchmarks continued their winning streak backed by firm global cues and scaled a fresh all-time high of 14869. The Nifty ended the session at 14790, up 142 points or 1%. The market breadth remained positive with A/D ratio of 1.65:1. Barring FMCG, all major indices ended in the green led by pharma, financials and metal. 

* The daily price action formed a small bodied bull candle carrying shadows on either side, indicating continuance of positive bias amid rise in volatility. The index completed faster retracement as it entirely retraced past six session’s decline (14753-13597) in just three sessions, indicating a robust prices structure. In the process, the Nifty midcap index clocked a fresh all-time high of 22580

* We maintain our positive stance and expect the Nifty to maintain its northbound journey and gradually head towards our revised target of 15000 in coming sessions. Meanwhile broader markets are expected to resume their outperformance post faster retracement

* Over the past three sessions index has rallied more than 1270 points, which hauled daily stochastic oscillator to the overbought territory (at 89), indicating a couple of days temporary breather at higher levels cannot be ruled out. However, we believe any breather from here on should not be construed as negative. Instead it should be capitalised on as incremental buying opportunity in quality large cap and midcap to ride the next leg of the rally

* Our target of 15000 on Nifty is based on: a) 123.6% external retracement of last decline (14753-13597), at 15026 b) long term rising trend line drawn adjoining 2010-2015 highs of 6338 and 9119, placed around 15050

* Broader market indices have retraced past 14 session’s decline in just three sessions. Faster pace of retracement signifies structural improvement that augurs well for next leg of up move. The Nifty midcap index has clocked a fresh all-time high whereas the small cap index is still ~22% away from all-time high. Thus, we expect small caps to witness catch up activity

* Structurally, formation of higher peak, trough on the larger degree chart makes us confident to retain the support base for the Nifty at 14200 as it is 50% retracement of current up move (13597-14869) at 14232 coincided with lower band of Tuesday’s gap (14469-14281)

* In the coming session, volatility would remain high owing to weekly derivative expiry session. However, we expect the Nifty to hold 14700 levels (spot). Hence, use intraday dip towards 14710-14735 to create long position for the target of 14828.

NSE Nifty Daily Candlestick Chart

Bank Nifty: 34267

Technical Outlook

* The Bank Nifty extended gains as buying demand continued at elevated level, lading index to fresh life highs on Wednesday . The index gained 1 . 4 % to settle at 34758 . The Nifty PSU banking index outperformed its private peer as both gained 2 . 6 % and 1 . 7 % respectively . 

* The daily price action formed a bull candle with sizeable lower shadow indicating buying demand emerging during intraday decline signifying continued follow through momentum and extension of ongoing rally . In the process Index achieved our target of 34800 levels on expected lines

* Going ahead, we expect the overall positive bias to continue as long as higher low -high sequence is maintained . However, after >5000 points gain in just five trading sessions, daily stochastic has entered overbought trajectory with reading of 94 , indicating a temporary breather around weekly expiry and RBI policy cannot be ruled out . A sustained close above 34800 post RBI policy would indicate extended rally towards 35500 levels which is 150 % extension of current up move (from 29687 ) as compared to December rally

* We are confident in revising support upwards at 32000 mark which is : a) 50 % retracement of the current up move 29687 to 34652 placed at 32170 levels b) Value of a Trend line connecting past three session lows around 32000 levels

* In the coming session, we expect index to hold Wednesdays low (34011 ) . Hence, we recommend utilizing intra day dips towards 34420 -34480 create fresh long positions in Bank Nifty February Futures to for target of 34738 meanwhile stop loss is placed at 34368 Among the oscillators, the daily stochastic has approached overbought status with reading of 94 and could attract profit booking around psychological mark of 35000 levels

Bank Nifty Index – Daily Candlestick Chart

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