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Nifty to hold 17500 in upcoming truncated week

Technical Outlook

* The Nifty started the week on a flat note and staged a pullback, which remained short lived. The selling pressure accelerated on breach of psychological mark of 18000. As a result, weekly price action formed a bear candle carrying a lower high-low after 12 weeks rally, indicating a pause in upward momentum

* Going ahead, we expect buying demand to emerge around key support threshold of 17500 in upcoming truncated week and undergo a higher base formation that would make market healthy after 20% rally seen over past three months. Such intermediate episodes of breather make larger structural up trend healthy as seen in previous bull markets. Hence, ongoing corrective phase should not be construed as negative, instead dips should be capitalised on to build quality portfolio over medium term. Key point to highlight since May 2020 is that, time wise index has not corrected for more than two to three consecutive weeks. In current scenario, index has already corrected in past two weeks. We expect it to maintain the rhythm by arresting ongoing correction in couple of weeks. Meanwhile, last week’s high of 18200 would act as immediate resistance

* 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 three weeks. We expect both indices to maintain same rhythm and form a higher base in the vicinity of 50 days EMA. Hence, focus should be on accumulating quality midcaps

* Among sectors, BFSI, realty and infra are expected to outperform while IT, auto and metal provide favourable risk-reward setup

* In large caps we prefer SBI, Bajaj Finance, Tata Motors, Tata Steel, United Spirits, L&T. while in Midcaps we like ABB, L&T Infotech, Ashok Leyland, Prestige Estates, Jindal Stainless, Bank of Baroda, ABFRL, Gateway Distriparks, Gokaldas Exports

* Structurally, the formation of higher peak and trough on the larger degree chart signifies robust price structure that makes us believe that ongoing breather would find its feet around 17500 as it is confluence of: a) 50 days EMA is placed at 17550 b) October 2021 low is placed at 17452

* In the coming session, the index is likely to open on a positive note amid mixed Asian cues. We expect, index to garner support around last weeks low of 17600. Hence, use dip towards 17635-17665 for creating long position for target of 17752

NSE Nifty Weekly Candlestick Chart

Nifty Bank: 39115

Technical Outlook

* The weekly price action formed a bearish engulfing candle indicating profit booking at higher levels and pause in upward momentum

* Going ahead, we expect the index to hold above the Friday’s panic low (38426 ) on a closing basis and enter into a consolidation in the broad range 38400 -40500 in the coming weeks thus forming a higher base for the next leg of up move .

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

* We believe the current breather should not be seen as negative instead it should be used to accumulate quality banking stocks .

* The short term support base for the index is placed at 38000 - 38400 levels being the confluence of :

* 80 % retracement of the recent up move (36876 -41829 )

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

* the rising 10 weeks EMA is also placed at 38260 levels

* Weekly stochastic placed at its three periods average suggest consolidation with positive bias in the coming weeks

* In the coming session, index is likely to open on a positive note amid mixed Asian cues . We expect, supportive efforts to emerge around 38600 and the index to undergo base formation . Hence, capitalise dip towards 38810 -38870 for creating long position for the target of 39140 , maintain a stoploss of 38690

Nifty Bank Index – Weekly Candlestick Chart

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