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NSE (Nifty): 17899

Technical Outlook

* The index witnessed a roller coaster ride as the Nifty saw more than 400 points move during the session, indicating elevated volatility. As a result, daily price action formed a bear candle with sizable upper shadow, highlighting extended profit booking after retreating from upper band of consolidation at 18200. In relative terms, small cap index continued to outperform as stock specific action continued

* Over the past 12 sessions, the index has been consolidating in a range of 18200-17700. We believe ongoing consolidation amid stock specific action would make the market healthy and help weekly Stochastic oscillator to cool off the overbought conditions (currently at 36). The lack of faster retracement on either side indicates extended consolidation, which would offer incremental buying opportunity as index approaches price/time wise maturity of correction. Price wise the Nifty has maintained the rhythm of not correcting for more than 7-9% while sustaining above 50 days EMA and time-wise intermediate corrections have got arrested within four weeks, observed during past 18 months. As the index has already corrected 5.5% over past three weeks, we expect it to hold 17500 and eventually challenge upper band of consolidation at 18200. Hence, dips should be capitalised on to accumulate quality stocks across large and midcaps segments

* The broader market indices are relatively outperforming despite extended profit booking in the benchmark. Currently, both indices are forming a higher base above 50 days EMA that has been held since June 2020, highlighting robust price structure. We expect Nifty midcap and small cap indices to extend their consolidation and witness stock specific action

* Structurally, the formation of higher peak and trough on the monthly chart signifies robust price structure that makes us believe that ongoing breather would find its feet around 17500- 17600 range as it is October 2021 low which is placed at 17452.

In the coming session, the index is likely to open on a subdued note tracking weak global cues. We expect, index to prolong the consolidation amid stock specific action. Hence, use pull back towards 17950-17980 for creating short position for target of 17863

NSE Nifty Daily Candlestick Chart 

Nifty Bank: 38041

Technical Outlook

* The daily price action formed a small bear candle with a long upper shadow which maintained lower high -low signaling continuation of the corrective decline . The index is currently placed around the psychological mark and major support area of 38000 -37800 , holding above the same will lead to continuation of the current consolidation . Failure to do so will lead to extended correction

* Key observation is that the index since April 2020 has not corrected for more than four weeks barring one instance while 50 days EMA has acted as strong support during each of the corrective phase . In the current scenario with four weeks of decline already behind us, we expect the index to maintain the rhythm and form a higher base around the 50 days EMA going forward

* On the higher side the current week high of 39100 which also coincides with the 23 . 6 % external retracement of the entire last four weeks breather (41829 -37981 ) is likely to act as immediate hurdle for the index

* The index has already taken 16 sessions to retrace less than 80 % of the preceding 16 sessions up move (36876 -41829 ) . A shallow retracement highlights a positive structure and a higher base formation . Hence we believe the current breather should not be seen as negative instead it should be capitalized to accumulate quality banking stocks for the next leg of up move . Buying on dips strategy has worked well on multiple occasions in the last 18 months

* The index is currently placed at the support area around 38000 - 37800 levels being the confluence of :

* 80 % retracement of the recent up move (36876 -41829 ) placed at 37870 levels

* the upper band of the recent seven months range breakout area is also placed around 37800

* In the coming session, index is likely to open on a soft note amid weak global cues . We expect, the index to continue with its consolidation around the crucial support area of 38000 . Hence use intraday dips towards 37800 -37870 for creating long position for the target of 38130 , maintain a stoploss of 37680.

Nifty Bank Index – Daily Candlestick Chart

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