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Nifty :16614

Technical Outlook

* The Nifty witnessed a gap down opening (16985-16824) and contrary to our view breached the intermediate support of 16800. As a result, daily price action formed a bear candle with small lower shadow, indicating extended correction amid global volatility. In the process, the index corrected 11% from life time high of 18600

* The breach of key support of 16800 along with lower high-low formation signifies extended correction. We believe, for a meaningful pullback to materialise, the index needs to form a higher high-low on a closing basis, else extended correction.

* Key point to highlight is that, over past six sessions it has declined 1230 points, hauling daily and weekly stochastic oscillator in oversold territory (placed at 13). We expect volatility to gradually subside near oversold territory which would help Nifty to find supportive efforts in the range of 16300-16200 as it is confluence of:

* a) 200 days EMA is placed at 16288

* b) price parity of mid-November decline (18210-16782) is at 16255

* c) 50% retracement of April-October rally (14151-18604), at 16380

* Meanwhile, psychological mark of 17000 would act as immediate hurdle as it is confluence of:

* a) Monday’s gap area is placed in the range of 16985-16824

* b) 50% retracement of ongoing corrective phase (17640-16410) is placed at 17025

* The broader market indices have extended breather after showing relative outperformance over past two weeks. Currently, both indices are undergoing slower pace of retracement as over past 9 weeks Nifty midcap, small cap indices have retraced 61.8% of preceding 8 weeks rally. Slower pace of retracement signifies healthy retracement that would set the stage for next leg of up move.

In the coming session, the index is likely to open on a positive note tracking mixed global cues. However, we believe initial pullback will remain short lived as intraday resistance is placed around 16900 range. Hence use pullback towards 16840-16870 for creating short position for target of 16762

NSE Nifty Weekly Candlestick Chart

Nifty Bank: 34439

Technical Outlook

* The daily price action formed a sizable bear candle with a lower high -low signaling continuation of the corrective decline . Contrary to our expectation the index opened the session with a downward gap below its 200 days EMA and the previous month low (35327 ) indicating extended correction .

* Index after the sharp decline of 3500 points in just six sessions has approached oversold territory and is placed around the price parity with the previous three major decline of around 20 % each in the last 20 months placed around 33400 -33000 levels . Going ahead, we expect the volatility to subside around the support area of 33400 - 33000 and technical pullback cannot be ruled out

* On the higher side immediate resistance is placed at 35500 levels being the confluence of the Monday’s breakdown area and the upper band of the Monday’s gap down area

* Structurally, time wise index has maintained rhythm over past 20 months of not correcting for more than 9 weeks’ . In the current scenario we are already in the 9 weeks of correction . we expect ongoing corrective phase to mature in coming weeks as Index has approached oversold territory

* Among the oscillators the daily stochastic has approached oversold territory and is placed at the reading of 10 signaling a pullback likely in the coming sessions

* In the coming session, index is likely to open on a positive note amid mixed global cues . We expect, the initial pullback to remain short lived as index would face immediate resistance around 35300 . Hence use intraday pullback towards 34970 -35030 for creating short position for the target of 34710 , maintain a stoploss at 35165

Nifty Bank Index – Weekly Candlestick Chart

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