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Past two week’s consolidation breakout augurs well for next leg of up move..

Technical Outlook

* The Nifty started the week on a buoyant note and gradually scaled a fresh all-time high of 16713. The weekly price action formed a small bull candle carrying higher high-low, indicating resumption of upward momentum after last week’s breather. In the process, on expected lines broader market indices have maintained the rhythm of maturity of price/time wise correction

* Going ahead, we reiterate our stance as we expect the index to resolve above past two week’s consolidation (16700-16400) and gradually head towards our revised target of 17000-17200 in coming month aided by firm global cues. Hence, any volatility from here on would present incremental buying opportunity to own quality large and midcap stocks. Our target of 17000-17200 is based on following observations: (a) implied target of past two week’s consolidation (16700-16400) is placed at 17000 (b) since January 2021, twice the Nifty has seen 1800 points rally (during January-February=1835 points and AprilJune=1764 points). In the current scenario, the Nifty would complete 1800 points at 17200 projected from June low of 15450

* Sectorally, we expect IT, infra, capital goods and consumption to outperform while BFSI & auto stocks are poised for technical pullback from oversold trajectory

* In large cap, we like Axis Bank, HDFC, United Spirits, Titan, Reliance Industries, Ambuja Cement, Info Edge, while in midcaps we prefer Persistant System, Bajaj Electricals, Timken, Fortis, Trent, Grindwell Norton, Orient Cement, Navin Fluorine, Mahindra Logistics

* In line with our view, Nifty midcap and small cap indices maintained the rhythm of not correcting for more than 10% and arresting corrective phase within three weeks in a row. In current scenario as well, both indices have arrested corrective phase within three consecutive weeks after correcting 6% & 10%, respectively, from their all time highs. The supportive efforts in the vicinity of 50 days EMA make us believe the broader market indices would undergo base formation that would pave the way for next leg of up move

* Structurally, the formation of higher peak and trough on the larger degree chart makes us confident to retain support base at 16100, as it is confluence of: (a) positive gap recorded on August 4 (16131-16176) (b) 10 week’s EMA at 16120 (c) past three week’s low is placed at 16162 In the coming session, the index is likely to open gap up amid pullback in global market. We expect index to trade with positive bias and maintain a higher high-low formation. Hence use intraday dips towards 16720-16745 to create long for target of 16833.

NSE Nifty Weekly Candlestick Chart

Nifty Bank: 35627

Technical Outlook

* The weekly price action formed a high wave candle with a long lower shadow signaling strong support at lower levels around 34800 -34500 levels

* Going ahead, we expect the index after the recent healthy base formation to breakout above the upper band of the range (36300) and head towards 37700 levels in the coming month as it is the confluence of the measuring implication of the recent range (36300 -34800 ) and the previous all -time high of February 2021

* In the smaller time frame the index in the last 15 sessions has retraced just 61 . 8 % of its previous five sessions up move (34115 -36219 ) . A shallow retracement highlights a higher base formation and a positive price structure

* We do not foresee index to breach strong support of 34500 . Buying the declines strategy has worked well over past 15 months . Hence, any corrective decline in the coming week would offer incremental buying opportunity in quality banking stocks . The support base of 34500 is the confluence of the : (a) 80 % retracement of the current up move (34115 -36317 ) placed around 34500 levels (b) rising 20 weeks EMA also placed around 34614 levels (c ) the last two weeks’ lows are also placed 34800 levels

* Among the oscillators, weekly stochastic rebounded from the neutral reading of 50 and is seen forming a base above its average thus validates positive bias

* In the coming session, index is likely to open on a positive note tracking firm global cues . We expect the index to resolve higher and challenge the psychological mark of 36000 . Hence use intraday dips towards 35780 —35840 for creating long position for target of 36110 , maintain a stoploss of 35690

Nifty Bank Index – Weekly Candlestick Chart

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