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NSE (Nifty): 16569

Technical Outlook

* The Nifty witnessed a gap up opening (16615-16692) and scaled a fresh all-time high of 16701. However, profit booking from 16700 levels dragged index lower. The daily price action resembles a dark cloud cover candle, indicating profit booking at higher levels. In the process, Bank Nifty pared initial gains and settled at lower band of past nine sessions range at 35500

* Key point to highlight is that over past three weeks index has rallied 1188 points that hauled weekly stochastic oscillator in overbought territory (placed at 92), indicating couple of days breather from here on can not be ruled out. However, such a breather should be capitalised on to accumulate quality stocks as we believe, strong support is placed at 16100 levels. We believe a breather from hereon would make market healthy and pave the way towards 16900 in coming month as it is 161.8% extension of mid-June rally (15450-15962) projected from July high of 15962

* The broader market indices extended breather. We expect Nifty midcap and small cap indices to maintain the rhythm of not correcting for more than 10% while sustaining above 50 days EMA, since June 2020. In current scenario as well, both indices arrested ongoing corrective phase near 50 days EMA after correcting 6% & 8%, respectively from their all time highs. Thus couple of days breather from hereon should not be construed as negative, instead dips should be capitalised on as incremental buying opportunity as we expect, broader market indices to undergo base formation above 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) Last week’s low is placed at 16162

In the coming session, the index is likely to witness a gap down opening tracking weak global cues. We expect intraday pullback to remain short lived. Hence use intraday pullback towards 16460-16485 to create short position for target of 16373.

NSE Nifty Daily Candlestick Chart

Nifty Bank: 35554

Technical Outlook

* The daily price action formed a bear candle as the index reacted lower from the upper band of the last 10 session range (36300 ) and closed near the lower band of the range . The index in today’s session is opening gap down amid weak global cues signalling continuation of the Wednesday corrective bias

* Going ahead, only a move above the upper band of the last 10 session range (36300 ) will open further upside in the coming sessions . Failure to do so will lead to consolidation in the range of 34500 -36200 in the coming sessions

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

* In the last 10 sessions the index has retraced less than 38 . 2 % of its previous five sessions up move (34115 -36219 ) . A shallow retracement post a sharp up move highlights a higher base formation and a robust price structure

* Structurally, the formation of higher peak and trough on the larger degree chart makes us confident to revise support base upward at 34500 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 34560 levels

* Among the oscillators the daily stochastic has generated a sell signal signalling corrective bias in the coming sessions

* In the coming session, index is likely to open gap down amid weak global cues . Volatility likely to be high on account of the volatile global cues . We expect the index to trade corrective bias as opening below the last 10 session range (35500 -36300 ) . Hence after a gap down opening use pullback towards 35410 — 35470 for creating short position for target of 35180 , maintain a stoploss of 35590

Nifty Bank Index – Daily Candlestick Chart

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