The price action formed a Bearish engulfing candle as profit taking in recently runup stocks weighed on sentiments after a sharp runup in preceding week - ICICI Direct
Nifty : 20906
Technical Outlook
* The index started the session on a flat note however, drifted downward as the day progressed. As a result, daily price action resulted into a bearish Engulfing candle that engulfed last session’s bull candle, Consequently, index closed below previous session’s low after eighteen sessions, indicating dwindling upward momentum.
* We believe, ongoing breather would help index to cool off the overbought conditions formed due to ~1200 points rally seen in just seven sessions. However, the broader structure remains robust which makes us reiterate our positive stance and expect index to head towards 21400 in coming weeks. Thereby, buying dips would be the prudent strategy to adopt as we expect index to hold the key support of 20500 in coming sessions. Our positive bias is further validated by following observations:
* A) The Banknifty index has witnessed faster pace of retracement as it retraced 14 weeks decline in just six weeks, indicating rejuvenation of upward momentum. BFSI carries 35% weightage in the Nifty which would provide impetus for next leg of up move
* B) Declining yields, suppressed Brent crude oil prices and stable currency (INR/USD) along with strong institutional flows would act as tailwinds
* The formation of higher peak and trough along with shallow retracement signifies elevated buying demand that makes us confident to revise support base at 20500 as its is confluence of 38.2% retracement of past three weeks rally (19768-21006) coincided with last week’s low of 20508
Nifty Bank: 47098
Technical Outlook :
* The price action formed a Bearish engulfing candle as profit taking in recently runup stocks weighed on sentiments after a sharp runup in preceding week
* Going forward, we expect prices to move towards 48000 in a non -linear fashion as some consolidation along the way would be a healthy sign . Target of 48000 is based on 138 . 2 % retracement of entire decline (46369 -42105 ) . Stick to buy on dips strategy with key support now being revised at 45900 being 38 . 2 % retracement of past week rally
* Structurally, index posted faster retracement of entire July -October decline in just four weeks highlighting robust price structure . Further participation of both private/public sector banks make the rally more dependable in terms of having further legs . We expect PSU banks to relatively outperform over medium term as the PSU bank index has given a multi year breakout
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