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Below the Quote on Weekly Technical Outlook: A pause before the storm is what we can say for Nifty 50 as we head toward the USA presidential election by Lovelesh Sharma, Consultant, SAS Online – a deep discount broker

A pause before the storm is what we can say for Nifty 50 as we head toward the USA presidential election. History tells us that volatility usually accompanies this event for Indian markets, whether it's a Republican or a Democrat. It also largely depends on the ideology, which influences the dollar and shifts global dynamics. The 2021 presidential election caused Nifty to shed around 8%, while the 2016 presidential election impacted Nifty by 5.5% on an intraday basis. So, a critical week with volatility is about to be witnessed.

Nifty has formed an inside day pattern on the daily chart and remains below the crucial 20 and 50 SMAs, with a bearish crossover of the same. It has been a muted week with mild recovery in stocks, as the number of stocks above the short-term 10 and 20 moving averages saw an uptick. However, on a higher timeframe, the breadth largely remains negative, while the 20-day advance-decline continues to be in oversold levels.

Price action on the lower timeframe suggests a contraction in price action, with a range between 24,500 and 24,150. In a lower highs, lower lows formation with multiple resistances at higher levels, the price suggests 24,500 as the line in the sand for bears to hold. The 20 and 50 SMAs are placed at 24,330 to 24,344, respectively. So, multiple resistances, along with a global event, make key data such as price and OI very important.

On the downside, support is placed at 24,150 and 24,110, which are its swing lows. Below that, we may see extended selling toward 23,600 and 23,150 levels. We maintain a sell-on-rise strategy for Nifty unless we witness a breadth thrust reading. OI analysis for Nifty points to a concentrated range of 24,500, where a short buildup is seen, while fresh long buildup has been observed at 24,000-24,100 levels. IV at above 16 levels indicates a move of more than a percent on an intraday basis.

Bank Nifty, on the other hand, is stuck in a range of 52,500 to 51,700. A volatile move followed by an inside day pattern indicates a contraction within a volatile environment. On the very short-term hourly chart, OI data points to resistance at 52,300 and 52,500, where high short buildup is seen, while on the downside, the OI concentration points to 51,700 as immediate support. If broken, this could push Bank Nifty further down to lower levels of 51,300. Bank Nifty IV has seen an uptick to 17 levels, indicating a move of more than a percent.

With the USA presidential elections next week, it becomes crucial to track turning points of support and resistance, as well as changes in OI during the first two days of the week. We maintain a sell-on-rise strategy as long as Bank Nifty remains below 52,500 on a closing basis.

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