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Nifty : 16585

Technical Outlook

* The Nifty witnessed a range bound activity in a 170 points range and settled the session on a subdued note. As a result, daily price action formed an inside bar as index confined within Monday’s trading range, indicating breather after past three sessions sharp up move. In the process, Nifty small cap relatively outperformed the benchmark by gaining 1.2%, suggesting continuation of technical pullback

* The rejuvenation of upward momentum backed by improvement in market breadth signifies broad based participation. In addition to that cool off in VIX highlights improved market sentiment that augurs well for extension of ongoing pullback towards 16800 in coming sessions. Thus, temporary breather from here on should not be construed as negative. Instead dips should be capitalised on to accumulate quality stocks. Our target of 16800 is based on following observations:

* a) 200 day’s EMA placed at 16750

* b) 50% retracement of the entire April-May decline (18115-15735) • The formation of higher high-low after 7 weeks corrective phase, signifies pause in downward momentum that makes us confident to revise support base at 16100 as it is 61.8% retracement of current up move (15735-16695)

* Structurally, index has maintained the rhythm of witnessing buying demand in the vicinity of 52 weeks EMA, observed over past two decades. Despite elevated global volatility, Nifty managed to hold the key support threshold of 15600 on multiple occasions and eventually staged a bounce highlighting broader positive structure remains intact

* Broader market indices managed to hold early May panic lows and recouped intra-month losses. Going ahead, follow through strength above upper band of past 3 weeks range would be required for extended pullback, else prolongation of consolidation amid stock specific action that would help Nifty midcap and small cap indices to undergo a base formation

* In the coming session, index is likely to open on a flat note tracking mixed global cues. We expect buying demand to emerge from upper band of Monday’s gap area placed around 16460. Hence, use intraday dip towards 16490-16520 for creating long for target of 1660

NSE Nifty Daily Candlestick Chart

Nifty Bank: 35487

* The daily price action formed a bear candle with a lower high -low signaling profit booking after a sharp up move of almost 3000 points in just seven sessions .

* Going ahead, a couple of days of breather can not be ruled out, however it should not be considered as negative instead dips towards 34500 -34800 should be used as a buying opportunity for gradual up move towards 36500 levels in the coming weeks being the 61 . 8 % retracement of the April -May decline (38765 -33002 )

* Key observation in the recent market correction is that Bank Nifty is relatively outperforming the Nifty and the Bank Nifty/Nifty ratio chart is seen reversing from last 15 months falling channel highlighting strength and continuation of the current outperformance

* The index has formed a higher high -low on the weekly time frame which make us confident to revise the key support base higher towards 34000 levels as it is the confluence of :

* (a ) 61 . 8 % retracement of the current up move (33002 - 36083 ) placed at 34100

* (b) Last week low is also placed at 34116 levels

* Among the oscillators the daily stochastic is seen reacting lower from the overbought reading of 91 , thus signaling range bound to corrective trend for the coming couple of sessions.

Nifty Bank Index – Weekly Candlestick Chart

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