The index opened the week on a positive note and witnessed profit booking around its long term 200-day EMA - ICICI Direct
Nifty :23897
Indian equity benchmarks snapped a three-weeks winning streak to close in the red, pressured by escalating Middle East tensions and surging crude oil prices. The Nifty 50 ended the week at 23,897, marking a 1.90% decline. Interestingly, broader markets displayed notable resilience; while mid-caps dipped a modest 0.8%, small-caps managed to remain flat. On the sectoral front, IT faced the heaviest selling pressure with a 10% slump, whereas Energy and Pharma emerged as the week's outperformers
Technical Outlook
* The index opened the week on a positive note and witnessed profit booking around its long term 200-day EMA. The weekly price action resulted into bearish candle with long upper shadow, indicating selling pressure at elevated levels.
* Index likely to open higher today tracking firm global cues. Index managed to hold its higher high-low structure for third-consecutive week. However, following a robust 11% rally, the market has entered a phase of healthy consolidation. Given that the weekly stochastic oscillator is currently in overbought territory (placed at 85), prolongation of ongoing consolidation cannot be ruled out in the upcoming truncated week.
* Going ahead, we expect the index to oscillate within the broader range of 24,500-23,400 range while sailing through geopolitical volatility and reacts to the ongoing corporate earnings season.
* This consolidation would make market healthy, as it strengthens the market’s foundation for an eventual push toward the 24,800 mark (aligned with the 200-day EMA) in the coming weeks. Thereby, any decline from hereon should not be construed as negative instead capitalize it to accumulate high-quality stocks on dips backed by strong earnings as strong support is placed at 23100, being 61.8% retracement of current up move (22182-24601) coincided with the gap aera (23555-23154).
Our constructive bias is further validated by following observations:
* The formation of higher peak and trough on the weekly chart signifies rejuvenation of upward momentum.
* The current up move is backed by the improvement in the market breadth as the current reading of % stocks trading above 50- and 200-days SMA has jumped to 67% and 40% compared to last month reading of 15%, signaling broadening of rally that bodes well for durability of ongoing up move.
* We expect broader market to relatively outperform the large caps as the ratio chart of Nifty500 vs Nifty 100 has resolved higher and at the cusp of breaking out of past two years consolidation. Such breakout would result into acceleration in Midcap and small caps outperformance going ahead.
* From a global market perspective, the S&P 500's recent breach of the historic 7,000 level and Nikkei and Kospi’s fresh move towards all-time highs signal robust momentum. We expect the Indian markets to witness catch up activity as it has direct co-relation with the global peers.
Key Monitorable:
A. De-escalation of geopolitical conflict
B. Q4 earning season
C. US Fed Policy
D. IIP data
E. Further decline in Crude, US Dollar Index
Intraday Rational:
* Trend – Higher high-low structure in weekly timeframe, indicating positive bias
* Levels - Buy around 80% of current upmove (23625-24604).
Nifty Bank :56090
The Bank Nifty Index ended the week on a negative note tracking geopolitical cues and settle at 56089.75 down 0.8%
Technical Outlook:
* Index started the week on a flat note and Index reclaimed 200- day EMA however profit booking at higher levels dragged the Index lower. The weekly price action resulted into Bear candle with upper shadow indicating profit booking at higher levels.
* Key point to highlight is that Index has been consolidating in vicinity of 200-day EMA. Going ahead We expect Index to hold above 54500 being 38.2% retracement of current upmove (54356-57456) and gradually resolve higher and head towards 57800 in the coming weeks being previous support will now act as resistance (change of polarity principle)
* On the weekly charts stochastic oscillator is in overbought territory with a reading of ~87 levels, indicating possibility of near-term breather that would make the markets healthier and set stage for next leg of up move. Therefore any decline from current level should be used to accumulate quality banking stocks backed by strong Q4 earnings as strong support is now placed around 54500 being 38.2% retracement of current up move(54356-57456). Key monitorable to watch out will be Banking heavy weights companies reporting their results in coming week.
* Nifty PSU Bank has been maintaining higher high higher low ,bear candle with shadow indicate breather after three weeks rally outperformed the benchmark and closed negative. Formation of lower high lower low on daily suggest profit booking at higher levels. Immediate support is placed around 8500 levels being 50% retracement of current rally (7833-9095).
Intraday Rational:
* Trend- Higher high-low in weekly timeframe, indicating positive bias
* Levels- Buy around 61.8% of current upmove (54606-57477)
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