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NSE (Nifty): 17857

Technical Outlook

* The Nifty started the session on a subdued note and drifted southward as intraday pullback were short lived. The sell-off accelerated on the breach of psychological mark of 18000 that resulted in a biggest single day decline of 1.9%, since April 2021. The daily price action formed a sizable bear candle carrying lower high-low, indicating extended correction

* The index has breached previous week’s low after 12 weeks rally (15513-18604) and closed below 20 days EMA, indicating pause in upward momentum. Going ahead, we expect Nifty to consolidate in a broader range of 17700-18400 with stock specific action amid progression of Q2FY22 result season. The secondary correction is the part of a secular bull trend which makes market healthy. In current scenario, we expect supportive efforts to emerge around key support threshold of 17700. Thereby, ongoing corrective phase should not be construed as negative, instead dips should be capitalized to build quality portfolio over medium term

* The broader market indices extended breather after retracing back to 50 days EMA. We believe, Nifty midcap and small cap indices are approaching price/time maturity of corrective phase. Since May 2020, both indices have not corrected for more than 9-10% and arrested intermediate correction within 3 weeks. We expect both indices to maintain same rhythm and form a higher base above 50 days EMA. Thereby, focus should be on accumulating quality midcaps

* Structurally, we expect index to maintain the rhythm of not correcting for more than 4-5% observed since April 2021 which makes us believe that ongoing breather would find its feet around 17700 as it is confluence of: a) 80% retracement of recent up move (17452-18604) b) 5% correction will mature around 17700, projected from all time high of 18604

In the coming session, index is likely to open on a flat note amid muted Asian cues. We believe, initial intraday pullback would be short lived after Thursday’s sharp decline. Thus, pullback towards 17978-17995 for creating short position for target of 17883

NSE Nifty Daily Candlestick Chart

Nifty Bank: 39587

Technical Outlook

* The daily price action formed a sizable bear candle with a lower high -low and close below the 40000 levels signaling extended correction contrary to our expectations .

* Key observation is that the index since April 2021 has not corrected for more than three to four consecutive sessions, with two sessions of decline already behind us, we expect the index to maintain the rhythm and witness a rebound in the next couple of sessions

* Going ahead, we expect the index to enter a consolidation phase in the broad range 41000 -39200 in the coming weeks thus forming a higher base after the recent strong up move in the preceding three weeks

* We believe the current breather should not be seen as negative instead it should be used to accumulate quality banking stocks for the next leg of up move .

* The index in the short term has strong support around 38000 -38300 levels being the confluence of the :

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

* rising 50 days EMA is also placed at 38000 levels

* the upper band of the recent seven months range breakout area is also placed around 38000 levels

* The daily stochastic remain in downtrend, however it has cooled off from the overbought territory and is currently placed near the neutral reading of 49

* In the coming session, index is likely to open on a flat note amid soft Asian cues . We expect the index to trade in a range and consolidate around 39000 levels after yesterday profit booking . As the index forming lower high -low, hence use intraday pullback towards 39920 -39980 for creating short position for the target of 39670 , maintain a stoploss of 40090

Nifty Bank Index – Daily Candlestick Chart

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