Nifty Turns Bearish as Profit Booking Intensifies - ICICI Direct
Nifty : 24471
Technical Outlook
Day that was ..
Equity benchmark concluded the weekly expiry session on a negative note tracking rise in crude oil prices. Nifty settled the day at 24471, down ~112 points. Broader markets relatively outperformed the benchmark with Nifty Smallcap gained 0.2%. Baring Pharma and IT, all other sector closed negative while FMCG, Metals and Realty were the top laggards.
Technical Outlook :
• Nifty started the day on a flat note and witnessed profit booking on the breach of previous session low. As a result, the daily price action resulted into bearish candle carrying lower high-low structure indicating extension of breather.
• Key highlight is that, over the past six sessions, the index has digested host of negative news on geopolitical uncertainty and crude oil volatility. It has pulled back to retest the ascending triangle breakout area that coincided with 200 days EMA, indicating healthy consolidation that would set the stage for next leg of up move
• Furthermore, the formation of higher peak and trough along with ongoing sector rotation signifies broadening of rally that bodes well for eventual breakout from consolidation and open the door for milestone of 25000 in coming weeks. Our positive bias remains intact as long as key support threshold of 24000 is held.
Our constructive stance is based on following observations :
I. Over past three decades there have been 8 occasions where Nifty has remained below its 200 days EMA for at least four months. The subsequent move, after reclaiming its 200 days EMA has been noteworthy as it delivered average returns of 12% to 19% over the next 3 to 6 months. In the current scenario, the index has reclaimed its 200-day EMA after four months consolidation, History strongly favours the bull
II. Following the Midcap move, Nifty smallcap index reclaimed its alltime high after 20 Months. The breakout from 8 years falling trend line on the ratio chart of Nifty smallcap / Nifty augurs well for acceleration of upward momentum
III. The index is at the cusp of 4 months consolidation breakout. But this breakout looks imminent as market breadth has seen significant improvement since then. Currently 56% of stocks of Nifty 500 universe are trading above their 200 days SMA compared to April swing high of 41%
IV. After 13 months relentless FII’s outflow, selling pressure is finally waning. FII’s turned into a net buyer worth Rs. 5100 cr. to in the August month
Key Monitorable :
a) US and India Inflation Print
b) Positive development on Geopolitical front
c) Falling crude oil prices
Intraday Rational :
• Trend – Over the past five sessions, the Nifty index has retraced only 23.6% of its prior six-session 1,150-point upmove, signals positive bias.
• Levels – Buy around 200-day EMA.
Nifty Bank : 57446
Technical Outlook
Day that was :
Bank Nifty ended the day on negative note down 0.42% at 57446 on back of mixed global cues.
Te chnical Outlook :
• Index started the day on a flat note and witnessed profit booking on the breach of previous session low. As a result, the daily price action has resulted into bearish candle carrying lower high-low structure indicating extension of breather.
• Index breached its last weeks low around 57350 and formed lower high lower low on daily charts , however it found supportive effort emerging from 50% retracement of recent rally (56024-58248) around 57100 coinciding with 50-day EMA. Going ahead we expect, index to sustain above the three months rising trend line that coincided with 100 days EMA placed at 56800 that would set the stage for next leg of up move. We expect, index to gradually resolve out of one month consolidation range where upper band is placed at 58500 in the coming week.
• Another observation is that over last 6 weeks Index has retraced by 38.2% of earlier 3 weeks rally, indicating slower pace of retracement which would help to set stage for next leg of rally.
• The PSU Bank Index has formed a doji like candle with lower high lower low indicating extended breather. Current breather should be used as incremental buying opportunity as index continued to sustain well above its 200 days EMA. Going ahead, follow through strength above last week week(8870) high would open the door for next lge of up move towards 9100 levels
Intraday Rational :
• Trend - Prolongation of consolidation in vicinity of 57500, indicating positive bias
• Levels : Sell around Tuesday high.
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