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Technical Outlook

• The index witnessed a roller coaster ride as Nifty witnessed more than 1000 points intraday move. Post gap down opening buying demand emerged from 80 % retracement of March-April rally (15671-18115), placed at 16100. As a result, daily price action formed a sizable bull candle carrying lower high-low, indicating supportive efforts at lower levels

• Going forward, for a meaningful pullback to materialize, index need to witness follow through strength and decisively close above previous session high of 16400, else continuance of corrective bias amid elevated global volatility. Further, only a breach below key support of 16100 would lead to extended correction towards March low of 15700. On the contrary, we observe that past four weeks corrective move hauled daily and weekly stochastic oscillator in extreme oversold territory (currently placed at 11, each). Historically, after approaching such lower reading, markets have witnessed technical pullback. Thus, we advise traders to refrain from creating aggressive short position in current highly volatile scenario. Instead, one should capitalise dips to construct portfolios in quality stocks in a staggered manner. Meanwhile, immediate upsides are capped at breakdown area of 16800

• Historically, 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 200 days EMA will mature at 15700

• The broader market indices relatively underperformed the benchmark. Currently, Nifty midcap, Nifty small cap indices are hovering around 52 weeks EMA coinciding with March lows. We believe, prolonged consolidation from hereon would help weekly stochastic oscillator to cool off amid ongoing Q4FY22 earning season. Going ahead, the formation of higher high-low on the weekly chart would confirm pause in downward momentum In the coming session, index is likely to open on a subdued note tracking weak global cues. We expect supportive efforts to emerge from key support of 16100. Hence, after a negative opening use dip towards 16085-16115 for creating long position for the target of 16203

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