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NSE (Nifty):15583

Technical Outlook

* The Nifty started the week on a subdued note. However, after the initial blip, elevated buying demand from 15400 mark helped the index to scale to fresh all time high of 15606. As a result, daily price action formed a sizable bull candle with small lower shadow, indicating acceleration of upward momentum

* We expect the index to maintain its northbound journey and head towards 15700 in coming weeks as it is 123.6% external retracement of February-April correction (15432-14151). The current rally has been broad based backed by the improving market breadth as currently 88% components of Nifty 500 index are trading above 50 days EMA compared to April reading of 60%. This augurs well for durability of ongoing up trend. We believe, rejuvenated traction in BFSI, Consumption, IT and Auto would drive index higher as it carries almost 70% weightage in the benchmark index Nifty

* Key point to highlight is that the index has entirely retraced past 10 weeks corrective move (15432-14151) in just 5 weeks. Faster pace of retracement signifies structural improvement that augurs well for next leg of up move. However, after 1000 points rally over past 11 sessions, temporary breather from higher levels cannot be ruled out. Hence, any temporary breather from here on should be capitalised to accumulate quality stocks

* The outperformance in the broader market indices has been backed by improving market breadth as currently ~85% of index components are trading above their 50 days EMA compared to April reading of ~60%. We expect, broader market to outperform wherein small cap index would challenge the all time high which is just 3% away

* Structurally, the formation of higher high-low signifies elevated buying demand that makes us confident to retain support base at 14900 as it is confluence of:

* a) 80% retracement of past 3 weeks rally (14725-15606), at 14900

* b) 50 days EMA is placed at 14853

* In the coming session, the index is likely to open on a positive note amid mixed Asian cues. We expect Nifty futures to trade with a positive bias while maintaining higher high-low formation. Hence, use intraday dip towards 15565-15590 to create long for target of 15679.

NSE Nifty Daily Candlestick Chart

Nifty Bank: 35526

Technical Outlook

* The daily price action formed a bull candle which completely engulfed previous session price action signalling extension of the current up trend and a positive bias

* Going forward, we reiterate our positive stance with target of 36200 in coming weeks as it is the confluence of the 80 % retracement of the entire last three months corrective decline (37708-30405) and the price parity with previous up move (30405-34287) as projected from the recent trough of 32115 signalling upside towards 36200 levels .

* Key observation in the recent up is that the index since April has maintained the rhythm of not correcting for more than two to three sessions . During previous week, also the index rebounded after two sessions of breather . Extended rally and shallow correction highlights positive price structure

* As mentioned in earlier edition the index has recently registered a breakout above the falling supply line joining major highs of the last three months as can be seen in the adjacent chart highlighting resumption of the primary up trend

* The formation of higher high -low on the weekly chart signifies elevated buying demand that makes us confident to revise the support base higher towards 34000 levels as it is confluence of the 38 . 2 % retracement of the current up move (32115 - 35463 ) and the recent breakout area and the April high (34287 )

* In the coming session, the index is likely to open on a positive note amid firm global cues . We expect the index to trade with positive bias and maintain higher high -low . Hence after a positive opening use intraday dips towards 35520 -35580 for creating long position for the target of 35830 , maintain a stoploss of 35410

Nifty Bank Index – Daily Candlestick Chart

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