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Nifty :22933

Technical Outlook

Day that was…

Equity benchmark experienced a volatile session where it settled the day on a flat note at 22933 , down by 0.05%. However, the market breadth remained in favor of advances with the A/D ratio of 2:1, as the broader market outperformed where both the Nifty midcap index and the Nifty small cap index closed on a positive note, up by 1.56% and 2.36% respectively. Sectorally, Realty, PSU Bank and Metal gained for the day while IT, healthcare and Pharma were the laggard.

Technical Outlook

* The daily price action resulted into small bull candle supported by higher low formation and managed to hold the multi-support mark of 22800 for the third consecutive session, thus indicating strong buying demand emerging from lower band of the broader consolidation range (22800-23800).

* Structurally, the index is consolidating in a contracting range of 22800-23000 since last three trading sessions, along with positive divergence on daily RSI. However, for a meaningful pullback to materialize, Nifty need to witness follow through strength and close above past three sessions high of 23300. Meanwhile, on the downside strong support on the downside is placed at 22500.

* In the current corrective phase, the market breadth indicator is showcasing extreme pessimism as the, % of stocks above 50 SMA and 200 SMA within Nifty 500 Universe have entered the bearish extreme zone of 15. Historically, such an extreme reading led to abating downward momentum in subsequent weeks, eventually paving the way for a durable bottom. Hence, focus should be on accumulating quality stocks on dips backed by strong earnings.

* Key point to highlight is that, both the Nifty midcap and nifty small cap index closed above the previous session high which was not the case since last nine consecutive days. The midcap index witnessed higher high low formation, resulting in a sizable bull candle, indicating impending pullback. Meanwhile, The Nifty small cap index bounced from the vicinity of election days low (14966) and engulfed previous two days candle, closing the day with a bullish bias. The past two decades data suggest, in a bull market phase, Nifty midcap and small cap have seen maximum correction of 21% and 30%, respectively. In current scenario, with 20% and 23% correction already in place in Midcap and small cap, possibility of another 3%-5% correction cannot be ruled out.

* In the current corrective phase, where there is lot of pessimism in the market, we are witnessing some silver linings which would provide impetus for pullback rally in coming weeks, details listed below:

* A) The US Dollar index has cooled off and now on the verge of breakdown from recent consolidation 110-107. Sustenance below 106.5, would provide cushion to equities

* B) Ease-off in geopolitical worries would bring some stability in equity markets

* C) The developed markets like DJIA, DAX are trading just a percent away from their lifetime highs. Buoyancy in global equity markets bodes well for pullback in domestic market

Nifty Bank : 49570

Technical Outlook

Day that was :

The Bank Nifty witnessed a stupendous up -move, amid volatility where it closed the day with a bullish bias at 49570 , up by 0 .98 % . Meanwhile, Nifty PSU Bank index outperformed the benchmarks index and closed the day on a positive note at 5951 , up by 1 .33 % .

Technical Outlook :

* The Bank Nifty witnessed a gap -down opening but soon recovered after finding support around the previous days low of 48815 . The index closed above the previous swing high after nine consecutive trading sessions, where the price action created a bullish engulfing pattern, indicating impending pullback.

* On expected line, the Bank Nifty witnessed a higher high low formation, after bouncing from the vicinity of 61 . 8 % retracement mark of the recent up -move (47844 -50641), indicating revival in the upward momentum .

* The key point to highlight, is that the Bank Nifty has witnessed a higher low pattern formation around the lower band of 2 years rising channel indicating revival in the upward momentum . Thus, making us believe, that the index will continue to resolve higher and move towards the mark of 51600 being 61 . 8 % retracement of previous fall (53888 -47844 ) . In the process, the key support is placed at 47844 being the previous swing low, coinciding with 80 % retracement of election low to Sept -24 rally, (46077 -54467 ) and any dip witnessed hereon should be capitalized as a buying opportunity in quality stock in a staggered manner .

* Structurally, after 12 % correction the Bank Nifty bounced from the lower end of the long -term rising channel amid oversold condition, indicating a pause in the downward momentum . Additionally, the Bank Nifty index did not breach the previous swing low contrary to the Nifty, thus, showing relative outperformance .

* Mirroring the benchmark index, the Nifty PSU Bank index surpassed the previous sessions high for the first time after nine consecutive trading sessions, creating a bullish engulfing candle at lower level, thus indicating a potential sign of reversal . The higher high low formation along with positive divergence on daily RSI, makes us believe that the index will continue to resolve higher towards 6260 being 80 % retracement mark of the recent fall (6387 -5748 ) . Meanwhile, immediate support is placed at 5748 , being the recent swing low .

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