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Nifty: 16170

Equity benchmarks snapped three sessions losing streak and concluded monthly expiry session on a positive note. The Nifty settled Thursday's session at 16170, up 144 points or 0.9%. The market breadth turned positive with A/D ratio of 1.4:1. Sectorally, financials, metals led the rally while FMCG took a breather

Technical Outlook

* The index started the session on a negative note tracking muted Asian cues. However, on expected lines, buying demand from 80% retracement of last leg of up move placed at 15900 that aided strong pullback in the second half of the session. As a result, daily price action resembles a hammer like candle, highlighting buying demand from key support zone of 15900.

* The revived traction in banking stocks helped Bank Nifty to resolve above past two weeks high, indicating pause in downward momentum. Going ahead, follow through strength in Bank Nifty (which carries 35% weightage in Nifty) would drive Nifty towards upper band of consolidation placed at 16400. Further, broader market participation would be required for a sustainable pullback towards 16800 in coming weeks else there would be prolonged consolidation in 16400-15700 range. In the process, bouts of volatility owing to global concerns can not be ruled out. Hence, any dips from here on should be capitalised on to accumulate quality stocks in a staggered manner. Our earmarked target of 16800 is based on following observations:

* a) 200 day’s EMA placed at 16760

* b) 50% retracement of the entire April-May decline (18115-15735)

* Structurally, over past two decades, on 16 out of 20 occasions despite transitory breach (not greater than 5%) of 52-week EMA (currently 16600) index has generated decent returns in subsequent 3 month and 6 months. In current scenario 5% from 52 weeks EMA is placed at 15700 which has been held on multiple occasions over past two weeks. We expect this rhythm to be maintained as strong support is placed in the range of 15600-15400 as it is confluence of:

* a) 61.8% retracement of CY21 rally b) equality of previous down leg of 14% projected from April high of 18115

* Broader market indices have taken a breather after recent sharp decline. We expect Nifty midcap and small cap indices to forma base while sustaining above Thursday’s panic low. On the contrary, breach below May low would lead to prolongation of downward momentum

* In the coming session, index is likely to witness gap up opening tracking positive global cues. We expect index to trade with a positive bias and form a higher high-low formation that would lead to rejuvenation of upward momentum. Hence, use intraday dip towards 16184-16210 for creating long position for the target of 16298

NSE Nifty Daily Candlestick Chart

Nifty Bank: 35094

The Bank Nifty closed the monthly expiry session on a strong note higher by 2 . 2 % on Thursday . The up move was broad based as all the 12 index constituents closed in the green . The bank nifty closed the session at 35094 levels up by 755 points or 2 . 2 %

Technical Outlook

* The daily price action formed a strong bull candle with a higher high -low and a firm close above its last two weeks high signaling positive bias . The index in the process has also closed above a falling supply line joining highs of the last seven weeks signaling a reversal of the recent corrective decline

* Going ahead, we expect the index to maintain positive bias while holding above current week low (34115 ) and head towards 36000 levels in a nonlinear fashion being the confluence of the 200 days EMA (placed at 35948 ) and the 50 % retracement of the entire recent decline (38765 -33002 )

* In the recent market correction Bank Nifty is relatively outperforming the Nifty as it is seen rebounding taking support near the 80 % retracement of the March up move (32156 -38765 ) and has already formed a higher high in the weekly time frame, we expect the current outperformance to continue .

* The index has formed a higher high on the weekly time frame which make us confident to revise the support base higher towards 33000 levels as it is the confluence of :

* (a) The value of the rising trendline joining lows of April 2021 (30405) and March 2022 (32155)

* (b) The low of May 2022 is also placed around 33000 levels

* Among the oscillators the weekly stochastic has generated a buy signal as it rebounds from extreme oversold territory thus validates positive bias

In the coming session, index is likely to open on a positive note amid firm Global cues . We expect it to trade with positive bias while maintaining higher high -low . Hence after a positive opening use intraday dips towards 35150 -35220 for creating long position for the target of 35480 , maintain a stoploss at 35030

Nifty Bank Index – Weekly Candlestick Chart

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