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NSE (Nifty): 16496

Technical Outlook

* The Nifty witnessed a gap up opening (16450-16592). However, profit booking from higher levels led the index to pare initial gains. The daily price action formed a small bear candle carrying higher high-low, indicating continuance of positive bias amid stock specific action. In the process, broader markets extended profit booking as the Nifty midcap, small cap lost 1%, 2%, respectively

* The formation of higher high-low on the weekly chart signifies that the broader structure remains intact. However, past three week’s 8% rally hauled weekly stochastic in overbought territory. Thus, couple of days breather from here on should not be construed as negative. Instead dips should be capitalised on to accumulate quality stocks as we believe secondary correction is a part of the bull market. Hence, in coming expiry week, we expect the Nifty to consolidate in the broader range of 16300-16700 amid stock specific action that would make market healthy and eventually pave the way to head towards 16900 in coming month as it is 161.8% extension of mid-June rally (15450-15962) projected from July high of 15962. Thus, extended breather from here on should be capitalised on to accumulate quality stocks

* We believe the broader market indices are approaching oversold territory after correcting 6% and 10% over the past two weeks. Thus, extended breather should not be capitalised on as buying opportunity as we expect broader market indices to maintain the rhythm of arresting intermediate correction within 10% while time wise not correcting for more than three consecutive weeks. Thus, we expect broader market to undergo base formation in the vicinity of 50 days EMA that would set the stage 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 upward at 16100, as it is confluence of: (a) Positive gap recorded on August 4 (16131-16176) (b) past two week’s low is at 16162

In the coming session, the index is likely to open on a positive note tracking firm global cues. We expect index to trade with a positive bias while maintaining higher high-low formation. Hence use intraday dips towards 16490-16520 to create long for target of 16598.

NSE Nifty Daily Candlestick Chart

Nifty Bank: 35124

Technical Outlook

* The daily price action formed a small bear candle which reacted lower from Friday’s gap down area and the lower band of the last 10 sessions range (35500 ) . The index gave up most of its intraday gains to close the session marginally higher

* Going ahead, in the ongoing expiry week, Nifty Bank is expected to undergo extended consolidation in 34500 -36300 range thus forming a base for the next leg of up move

* Structurally, in the last 12 sessions the index 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

* The current breather should not be construed as negative, instead dips should be capitalised to accumulate quality banking stocks

* The index has immediate support base at 34500 levels as it is confluence of :

* (a) 80 % retracement of the current up move (34115 -36317 ) placed around 34500 levels

* (b) rising 100 days EMA placed around 34480 levels

* Among the oscillators, the daily stochastic after the recent corrective decline has entered oversold territory with a reading of 14 , thus we expect buying demand to emerge at lower levels in the coming sessions

* In the coming session, index is likely to open gap up amid positive global cues . Volatility likely to remain high on account of the volatile global cues . We expect the index to trade in a range with positive bias while holding above 35000 levels . Hence after a gap up opening use dips towards 35090 —35150 for creating long position for target of 35390 , maintain a stoploss of 34970

Nifty Bank Index – Daily Candlestick Chart

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