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Prolonging of consolidation amid stock specific action

Technical Outlook

* The Nifty started the week on a positive note. However, profit booking from 50 days EMA (placed around 17500) dragged index lower. As a result, weekly price action formed a bear candle, indicating prolonged consolidation over third consecutive week in 17500-16800 range

* Since November low of 16782 Nifty has formed a higher low during last week at 80% retracement. At current juncture as well, over past five sessions index has retraced 80% of preceding four sessions up move (16892-17640). The slower pace of retracement signifies inherent strength that makes us believe index would form a higher bottom and gradually head towards higher band of consolidation placed at 17500

* The index has approached the maturity of price-time wise correction. Price wise, index has maintained the rhythm of not correcting for more than 11% since May 2020. Time wise, the index has arrested secondary correction within nine weeks. Thus, any dips from here on should be capitalized as incremental buying opportunity

* Sectorally, Capital goods, IT expected to continue outperformance while Metal, Infra are poised with favourable risk-reward setup

* In large cap space we like TCS, L&T Infotech, Reliance, Titan, L&T, Hindalco, Tata Motors while in Mid cap space we prefer Tata Communications, Kajaria Ceramics, Mphasis, RHIM, Sanghvi Movers, TCI, Philips carbon

* The broader market indices have taken a breather after showing relative outperformance over past two weeks. Currently, both indices are forming a higher base after retracing 61.8% of their recent up move, indicating healthy consolidation. We expect Nifty midcap, small cap indices to extend their ongoing consolidation amid stock specific action that would set the stage for next leg of up move.

* Structurally, over past three weeks Nifty has been forming a higher base above 100 days EMA (which has offered incremental buying opportunity on couple of occasions since June 2020). Thus, we expect Nifty to hold the key support threshold of 16800 as it is confluence of: a) since May 2020, index has not corrected for more than 10%. In current scenario, 10% correction from life high of 18600 will mature at 16740 b) In all 3 corrections since May 2020, index retraced 38% of preceding rally. 38% retracement of current rally is placed at 16900 c) November low of 16782 would now act as immediate support

In the coming session, the index is likely to open on a negative note tracking subdued global cues. Post negative opening, we believe supportive efforts to emerge around key support of 16800. Hence use dip towards 16820- 16855 for creating long position for target of 16939

NSE Nifty Weekly Candlestick Chart

Nifty Bank: 35618

Technical Outlook

* The weekly price action formed a bear candle signaling continuation of the overall consolidation for the third consecutive week around the 200 days EMA (currently placed at 35410 )

* Going ahead, we expect buying demand to emerge around the long term 200 days EMA and gradually head towards the upper band of the consolidation placed around 37500 levels

* Lack of faster retracement in either direction in the last three weeks signals continuation of the current healthy consolidation in the coming week

* Structurally, index has maintained rhythm over past 20 months of not correcting for more than 9 weeks’ time wise . With 8 weeks of correction behind us, we expect ongoing corrective phase to mature in coming weeks as Index has approached oversold territory

* Nifty Bank has immediate support at 35300 levels being the confluence of the following technical observations : • 200 days EMA placed around 35410

* 80% retracement of the August-October 2021 rally (34115 - 41829 )

* Among the oscillators the weekly stochastic is seen rebounding from the oversold territory thus supports the pullback in the index in the coming weeks

* In the coming session, index is likely to open on a negative note amid weak global cues . We expect the index to trade in a range while buying demand is likely around November lows (35327 ) . Hence use intraday dips towards 35300 - 35370 for creating long position for the target of 35650 , maintain a stoploss at 35180.

Nifty Bank Index – Weekly Candlestick Chart

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