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Nifty : 19122

Technical Outlook

• The index continued to inch southward as intraday pullback were short lived. Further, selling pressure accelerated on the breach of August low of 19223. The daily price action resulted into a bear candle carrying lower high low, indicating extended correction

• The elongation of downward move followed by shallow retracement below 50 days EMA signifies weakness in the short term. The formation of lower peak and trough on the weekly chart, highlighting corrective bias. Going ahead, to pause the ongoing downward momentum index need to decisively close above previous session’s high of 19347. Failure to do so would lead to continuation of corrective bias wherein strong support is placed at 18900-18800 zone. Meanwhile, key resistance is placed at 19550 as it is current week’s high coincided with 50 days EMA placed at 19590.

• Key point to highlight is that, the midcap index has logged a breakdown from 6 weeks consolidation while the small cap index retreated from 15 years resistance trend line drawn adjoining CY07-21 high, indicating profit booking after ~50% rally seen during Mar-Oct 2023 amid overbought conditions (monthly stochastic is hovering at 88).

• In a secular bull market, secondary correction is a common phenomenon wherein small cap index has a tendency of correcting 12-15% from swing highs. Thus, we believe ongoing correction would make broader market healthy wherein strong support for Nifty small cap is placed at 11400 as it is implicated target of past six weeks consolidation (13148-12297) coincided with 38.2% retracement of Mar-Oct 2023 rally (8682-13148). Thus, focus should be on accumulating quality stocks backed by strong earnings in a staggered manner.

• The formation of lower peak and trough amid global volatility makes us revise the support base downward for the Nifty at 18900-18800 zone as it is confluence of 200 days EMA is placed at 18826 coincided with 38.2% retracement of Mar-Sept rally (16828-20222), at 18925 and previous swing high of 18887 would now act as key support as per change of polarity concept

Nifty Bank: 42832

Technical Outlook

• The price action formed sizeable bear candle with lower high -low for fifth session indicating continuation of corrective bias as index closed below its 200 -day ema for past two sessions for first time since April highlighting reversion to long term mean and oversold nature of prices . However prices need to form higher high -low on daily chart to indicate pause in downward momentum

• Going forward, 43500 would now act as immediate key resistance while index has approached near next major support zone of 42500 -42700 as it is confluence of multiple observations listed below . Holding this support zone amid oversold conditions would lead to technical pull back :

• a) value of rising 52 -week ema which has been held on couple of occasions since CY2020 ,

• b) 50 % retracement of entire rally from March 2023 (38613 -46369),

• c) weekly and daily stochastics have approached oversold trajectory of 11 and 12 respectively indicating oversold nature of prices and would attract buying near key supports

• Structurally, Index is in the process of undergoing a retracement of March to July rally over while pricing in various negatives in the process . We believe current decline would lead to a strong higher base formation around 42500 zone that would act as a starting point for next leg of structural up trend 

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