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NSE (Nifty): 14296

Technical Outlook

* The Nifty witnessed a gap up opening on Tuesday but failed to sustain at higher levels. Sell-off from day’s high (14527) led the index to drift 320 points lower as intraday pullbacks were short lived. In the process, daily price action formed a bear candle with small lower shadow while sustaining below 50 days EMA, indicating continuance of corrective bias

* In the coming session, the index is likely to witness gap down opening below lower band of consolidation 14200, which was held on 3 occasions over past five weeks. A decisive close below 14200 would indicate extended declines towards key support threshold of 13900-13800 in coming weeks else there would be continuance of range bound action with stock specific focus amid Q4FY21 earnings. However, such extended decline should not be viewed as structurally negative. Rather, it would present a buying opportunity to accumulate quality large caps in staggered manner

* The average intermediate corrections since March 2020 has been to the tune of 9-10%. In the current scenario, 10% correction from life highs of 15432 measures around 13900. Hence, we believe extended correction towards 13900 would be a part of the healthy retracement from broader structure perspective

* The Nifty midcap and small cap indices have undergone profit booking after approaching their 52 week’s highs. Key point to highlight since March 2020 is that Nifty midcap and small cap indices have maintained the rhythm of not correcting for more than average 10% while sustaining above their 50 days EMA, indicating robust price structure. Currently, past couple of week’s 8% correction dragged both indices in the vicinity of their 50 days EMA, indicating possibility of couple of percentage correction from hereon cannot be ruled out

* Structurally, breach of lower band of consolidation 14200 would lead to extended correction towards key support of 13900-13800 range, as it is confluence of: a) 80% retracement of the February rally (13596-15432), at 13963, b) 10% correction from life highs (15432) will complete around 13900

* In the coming volatility induced expiry session, the index is likely to trade with a corrective bias as intraday pullbacks have been short lived. Hence, use intraday pullback towards 14220-14245 to create short for target of 14128

NSE Nifty Weekly Candlestick Chart

Nifty Bank: 31112

Technical Outlook

* The daily price action formed a bear candle as the index failed to capitalize on the positive opening . It reacted lower from the Monday’s gap down area (31911 -31304 ) and gave up its entire intraday gains to close lower by 0 . 3 % signalling continuation of the corrective consolidation

* In the coming session, the index is opening gap down near last week low (30520 ) . A follow through weakness below the same will lead to extension of the decline towards the major support area of 29600 -30000 levels .

* Key point to highlight is since March 2020 bottom, the index has a maintained rhythm of not correcting for more than 21 % . In the current scenario, with 19 % correction done, index is poised at crucial support near 30000 levels

* The index has strong support in the range of 29600 -30000 levels being the confluence of the following technical observations

a) Price equality with the average of the previous two major correction in the last one year signals strong support around 29700 levels

b)The rising long term 200 days EMA is also placed around 29830

* The last 10 weeks corrective decline has lead to the weekly stochastic placed near the oversold territory with a reading of 19 indicating an impending pullback in the coming weeks .

* On the higher side 32000 is likely to act as immediate hurdle being the high of previous week and the bearish gap area of 12th April 2020 .

* In the coming session, the index is expected to opening gap down near last week low (30520 ) . The bias remain corrective, hence use intraday pullback towards 30920 -30980 for creating short position for the target of 30710 , maintain a stoploss of 31090

Nifty Bank Index – Weekly Candlestick Chart

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