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Index approaching maturity of price, time wise correction…

Technical Outlook

* The equity benchmark started the week on a positive note however failed to sustain above upper band of consolidation (15900) on fourth occasion since June 2021. As a result, the weekly price action formed a bear candle majorly confined within last weeks trading range (15915-15635), indicating extended breather. The lack of faster retracement on either side signifies prolonged consolidation (15900- 15500) amid stock specific action

* The Nifty is approaching maturity of price/time wise correction. The shallow price correction along with prolonged time consolidation signifies strong base formation at 15500. The ongoing volatility indicates that couple of weeks breather cannot be ruled out. However, eventually we expect it to resolve out of four-week consolidation of (15500-15900) and head towards our target of 16100 in coming weeks. During ongoing consolidation index retraced its May rally by just 38%, indicating shallow retracement. Time-wise, the index has not corrected for more than three consecutive weeks in a row since April 2020. In current scenario, as index has already corrected over past two weeks. Hence, we expect it to maintain the same rhythm by arresting ongoing corrective phase in coming weeks. Therefore, dips should be capitalized as incremental buying opportunity as we enter the Q1FY22 earning season.

* We stay positive on IT, BFSI, Metals, Auto and Infra as key outperforming sectors going ahead

* Our preferred large caps are Infosys, Bajaj Finserv, Axis Bank, Tata Steel, Ambuja Cement & Maruti Suzuki while, in midcaps we like Indoco Remedies, L&T Infotech, Dhampur Sugar, JSL, Just dial, Siyaram, Minda Industries, Godrej properties and NCC

* The broader market indices relatively outperformed the benchmark as Nifty midcap and small cap scaled to fresh all time high. We expect broader market to endure its relative outperformance in coming weeks

* Structurally, we believe past five week’s consolidation helped index to form a higher base at 15600-15500 zone, which we do not expect to be breached as it is confluence of: a) 61.8% retracement of past four week’s rally (15145-15915), at 15440 b) 10 weeks EMA at 15478 In the coming session, index is opening on a positive note tracking firm global cues. We expect index to trade with a positive bias. Hence, use intraday dip towards 15740-15765 to create long for target of 15849.

NSE Nifty Daily Candlestick Chart 

Nifty Bank: 35072

Technical Outlook

* The weekly price action resulted in a small bull candle with a long upper shadow while maintaining higher high -lows indicating extended consolidation .

* Going ahead, we maintain our positive stance, however couple of weeks of breather can not be ruled out, we advise to capitalize such breather as an incremental buying opportunity for up move towards 36200 levels in the coming weeks as it is the 80 % retracement of the February – April 2021 decline (37708 -30405 )

* On a smaller time frame the index has witnessed a shallow retracement as it has retraced just 50 % of its May rally (32115 - 35810 ) over past five weeks

* Key observation is price action has been contracting over past few sessions suggesting that breakout from this consolidation is approaching . We expect index to breakout on the higher side given shallow retracement and robust price structure

* The formation of higher high -low in the weekly time frame gives us confident to maintain the support base at 34500 - 34200 being the confluence of the following technical observations :

* (a) The 80 % retracement of the recent up move (33908 -35811 ) placed at 34290 levels

* (b) The value of the rising demand line joining major lows since May 2020 is placed around 34550

* (c) The rising 50 days EMA is also placed at 34580 levels

* In the coming session, the index is likely to open on a positive note amid firm global cues . Volatility is likely to remain high . W e expect the index to trade with positive bias while sustaining above 35200 levels . Hence after a positive opening use intraday dips towards 35250 -35320 , for creating long position for target of 35540 , maintain a stoploss of 35140.

Nifty Bank Index – Daily Candlestick Chart

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