Nifty to consolidate for some more time
THE Nifty opened with a hundred point gap up and closed 105 point gain. The neutral RBI policy failed to enthuse the market. The Nifty settled at 17,895.20 with 104.85 points or a 0.59 per cent gain. The Banknifty ended on a flat note, and IT and the PSU Bank indices were the top gainers with 1.96 per cent and 1.65 per cent gains. The Nifty Smallcap-100 index outperformed with 1.23 per cent. The realty index was down by 2.21 per cent. FMCG and CPSE indices declined by half a per cent. The India VIX declined further to 15.65. The overall market was slightly positive as 1,059 advances and 910 declines were recorded. About 136 stocks hit a new 52-week high, and 159 stocks traded in the upper circuit.
The Nifty ended with interesting patterns on daily and weekly time frames. On a daily chart, it formed a long-legged doji and on the weekly chart is an inside bar. On a neutral RBI policy day, though the market closed in positive territory, it failed to form a bullish candle. In fact, it formed a parallel top. Now, 17,948 is the most important resistance for the market, and 17,452 is key support. As long as these levels are protected, the Nifty will consolidate for some more time. Either side breakout will be a lethal for the market. An upside breakout target is intact at 18,365. Before, 17,452 support, the 20DMA, 17,648, will act as strong support. In any case, on Monday, the Nifty closes below 17,840 mean the short term reversal is on the cards. As it formed an inside bar on a weekly chart, it does not imply trend change. A trending move will be witnessed only a closed above or below of the last week's range. For the last three weeks, the Nifty has been forming almost parallel highs. It shows that 17,948, working as strong resistance. Interestingly, last week also ended with a Doji candle and resulted in big swings. Let watch for next week's price action as the Nifty formed another doji at the top. Next week will be interesting.
(The author is financial journalist, technical analyst, family fund manager)
Crude oil and US Treasury yields top on watch list
A muted week closes with positive bias absorbing a lot of negative sentiments. The weekly scale chart gives us a clear view and eliminates the noise we see on daily trading ranges. Though, this week entire range was well within the previous week range but this week's close also is important as it opened way above previous week bearish close, sustained the lower levels, and closed well near all time high.
Technically, there is a lot of confluence around levels of 17,950 -
18,000. Nifty is meeting its one of the long term resistance based on Fibonacci extension, hence the consolidation we have seen. Also this makes higher levels very important to be breached. RSI remains well above 70, meaning momentum is strong and in favor of the bulls. The 50 and 20 MA on weekly scale remain positive on rolling basis. The important support is placed at 17,650 and 17,460.
Broader market remains healthy on weekly analysis. CNX500, an important index to measure breadth, closed at all time highs pointing to improved breadth. Small cap and Mid-cap breaking out of three week range and closing at new all time highs will continue to outperform. This also tells us that money is flowing to to broader market while benchmark Index needs to catch up.
Sector wise, we are now picking three important space for short term.
Auto Space is coming out of almost three quarters of corrective period and will see next leg of its bullish move here on, this also coincides with festive season sales demand. PSU Bank space is also showing momentum in short term and is able to close above its important resistances since Feb 2021. BankNifty is able to close near ATH but is still stuck in a range.
Reading Breadth indicators using RSI and MACD for broader market also establishes the fact that there may be more room on the upside but comes with caution as one has to be sector and stock specific and keep exposure in check. Two most important drivers to watch will be crude oil and US Treasury yields.
(The author is Prodcut Head, Finversify)