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Index likely to challenge the upper band of consolidation…

Technical Outlook

* The buying demand from lower band of consolidation that helped index to recoup intraweek losses. As a result, weekly price action formed a hammer like candle, highlighting elevated buying demand as Nifty has managed to hold the lower band of consolidation 15500 on fourth occasion in past seven weeks while absorbing host of unsettling events like Covid disruption, elevated global volatility and Q1FY22 earnings, highlighting inherent strength. In the process, broader market endured their record setting spree, highlighting relative strength

* Key thing to monitor in the coming week is that, the faster pace of retracement along with multi sector participation would confirm breakout from ongoing consolidation (15950-15500) and open the door for 16300. Over past two sessions, the index has retraced 80% of past seven sessions decline (15962-15513). Thus a breach above upper band of consolidation (15950) would dictate directional bias and lead index gradually to 16300 in coming weeks, else extended consolidation with positive bias amid stock specific action. Thus, dips from hereon should be capitalised on to accumulate quality stocks amid progression of Q1FY22 earning season. Our earmarked target of 16300 is based on following observations: a) implied target of recent consolidation (15950- 15500) breakout is placed at 16350 b) 161.8% external retracement of mid-July decline (15962-15513), placed at 16240

* We expect IT, metals, realty & infra, consumption to relatively outperform. BFSI and Auto sectors provide favourable risk-reward

* Our preferred large cap picks are SBI, JSW Steel, Bharti Airtel, Infosys, Tech Mahindra while, in midcaps we prefer, LTI, Escort, Tata Metaliks, Havells, Graphite, Suprajit, KNR Construction, Trent, Abbot India

* The Nifty midcap and small cap indices resumed up trend after temporary breather, highlighting rejuvenation of uptrend which make us believe broader market indices would endure their relative outperformance while maintaining higher high-low on the larger degree

* Structurally, the index is undergoing a shallow retracement as over past seven weeks it has merely retraced 23% of preceding 8 weeks rally (14150-15900), highlighting robust price structure. The persistent buying demand from key support zone of 15500 signifies strong base formation, which we do not expect to breach, as it is confluence of a) 80% retracement of June-July rally (15450-15962), at 15550 b) 50 days EMA placed at 15600

In the coming session, the index is likely to open on a positive note tracking firm Asian cues. We expect index to trade with positive bias while maintaining higher high-low. Hence use intraday dips towards 15790-15815 to create long for target of 15903.

NSE Nifty Weekly Candlestick Chart

Nifty Bank: 34584

Technical Outlook

* The weekly price action formed a bear candle with a long lower shadow singling corrective decline for the second consecutive week . However, buying demand on expected lines emerged from the lower band of the last eight weeks’ range (34000 )

* Going ahead, we expect the index to hold above the lower band of the last eight weeks’ consolidation range (34000 ) and gradually head towards the upper band of the range placed around 35800 levels . Lack of faster retracement in either direction signals continuation of the current consolidation .

* Key observation is that the index since May 2021 has not corrected for more than two consecutive weeks, with two weeks of decline already behind us we expect the index to maintain the rhythm and witness a pullback in the coming week

* Index has witnessed a shallow retracement as it has retraced just 50 % of its May rally (32115 -35810 ) over past eight weeks signalling a positive price structure . We advise to capitalize the current breather as an incremental buying opportunity in quality large and mid -cap banks as the overall structure remains positive

* The index has immediate support base at 34000 levels being the confluence of the following technical observations

* (a) The lower band of the last seven weeks’ consolidation range placed around 34000 levels

* (b) The rising 20 weeks EMA is also placed at 34120 levels

* (c) The 50% retracement of the preceding up move (32115 - 35985 ) is also placed at 34100 levels

* In the coming session, index is likely to open gap up amid firm Asian cues . We expect the index to trade with positive bias while maintaining higher high -low . Hence, after a positive opening use intraday dips towards 34670 -34730 , for creating long position for target of 34970 , maintain a stoploss of 34560

Nifty Bank Index – Weekly Candlestick Chart

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