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Below the Quote on Weekly Technical Outlook by Lovelesh Sharma, Consultant, SAS Online – a deep discount broker

Nifty

We are stuck between 20 & 50 MA on weekly scale as Nifty oscillates in this range but we are on the verge of a breakdown or a reversal. We have seen a rejection from 20 MA at 24633 which we peaked in December month but Nifty is also sustaining the 20 SMA Since November which is now at 23570.

Nifty formed an inside day which in bar chart indicates a contraction in the volatility of the prices and at the same time we have formed this well below the 50% of the previous candle high to low range. Nifty is just tad above the trendline support and the 50 MA. A break of this will be decisive while bulls need to defend this

The breadth signal is not very encouraging since around 65 – 70% stocks are below the short term 20 and mid-term 50 SMA on daily scale. This continues to deteriorate while at the same time Net New highs to new lows number is well below 0 indicating the bearish sentiment.

Nifty50 has an immediate resistance at 24150 where we have seen a gap formation and rise in volatility post that gap, so only a close above this would shift the price action range towards 24550 but given the overall structure and bears grip on any upside, we suggest sell on rise strategy with lower support at 23825 and below that 23570; previous swing low formed in November last week.

OI concentration has witnessed CE writing at 24100 – 24200 while PE build up is highest at 23900 – 23800. So, this points to the short-term coming week’s range for the Index.

BankNifty

BankNifty on the other hand has displayed similar pattern though a Gap up as well was not sustained. ADX, the trend velocity indicator is sloping downward on l4Hourly timeframe and is at 30.90 while the PDMI and MDMI are contracting. This suggests lack of directional strength in the underlying index. Secondly, the Momentum indicator RSI also is oscillating at 54 indicating the period of oversold and overbought but well within the price range of 53400 – 50600.

OI change was high at the strike of 52000 while on the downside writing was seen in PE at 51500. So we expect range for the short term to be within this range of 52000 – 51500 while a break from this range will shift the price action.

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