Markets have moved unexpectedly for those who did not gave attention to my last two posts but those who read it have earned many points on Nifty and we were left just few points away from my target of 8720! Its always tough to reach last lag of a game and it just seems the case here. Bulls MIGHT have to wait a little more to rally again. Today’s trade have got little pause to “Traders GST Booster”. Though overall trend is still intact to towards 9800 we might have to pass through great volatility to reach there. Looking ahead to GST update we might reach 9000 in August Expiry but looking ahead for some profit booking on next two days towars 8500. As we can notice in the attached chart, weekly channel breakout has been confirmed on Nifty charts as we got third confirmed closed over the channel today. So one thing is confirmed that we are heading towards new high but looking at daily charts we might get some correction but that will be an opportunity to buy for those who left out. we might stop around 848-8500 which derivative support as well as channel support but i would again revise my stop loss back to 8380 (which is neckline of inverted H&S) as GST is set to bring high volatility but also would revise my target to 8890-9000 from 8720. Still would always suggest to hedge your position with appropriate Nifty PUTS.
In my last two post i had been repeatedly saying that the overall trend of Nifty has turned positive with upside target of 9800 but had also mentioned about a knee-jerk reaction with minimum target of 8480 and we did achieved it tomorrow. But after profit booking we saw strong up move back in last two session. Some might say its a false recovery but i would like to inform them that the recovery was exactly from the channel support mentioned few days back. Novice traders might feel looking at the graph that yesterday we broke support so i am sounding wrong but as Dow Theory suggests that consider closing price while analyzing a stock price. This was the perfect example how much a closing price is important to follow for a trader. Now though we are still in overbought position on a daily charts, we are still going to witness a positive move up till the resistance line at 8720 while our trailing stop loss could be raised to 8480 spot level. Stock specific movement is still to be out perform for a traders. Be cautious though as volatility would prevail.
Markets have been pretty volatile these days and we can still expect the same in upcoming week as the daily charts suggests. As marked in the attached chart. Nifty is swinging between steep upward sloping channel since last few days and now we can expect some correction before trend resumes towards 9800 as i mentioned in my previous post in Nifty section. We had seen a good strong up move since the Brexit Referendum and now we can expect some profit booking to that extra punch of rally of last 200 points. As markets in chart, friday we got a close with spinning top formation which could be considered to be a bearish reversal to current trend. Even Nifty is resisting near to the channel line which makes my view a bit more strong. On the downside we can have two targets for correction which is at 8480, support line, and 8353, gap unfilled. So may be traders could go short next week with SL of 8577. But remember OVERALL TREND IS POSITIVE FOR LONG TERM SO ONLY TRADERS GO SHORT WHILE INVESTORS AND MEDIUM TERM POSITIONAL TRADERS BUY ON THIS DIP!
Nifty has been quite volatile since last few expiry but during this time it has given a birth to probable inverted Head and Should pattern on weekly charts. Neckline of the pattern which is considered to be breakout line of the pattern was at 8370 two week back but confirmation is considered only if we get 2 close above the same and i am expecting that tomorrow being last day of the week we are surely getting a second close above neckline.
Since Brexit fear has subdued we have seen some volume buying next week after the event took place which surely sign that global investors are trusting our economy over other developing countries. Even the IIP numbers have supported us! A buzz around the market of GST bill passage in this monsoon session could lift the markets to my inverted H&S tgt of 9800! Though this doesnt mean we wont see any corrections on the course, as i am expecting a correction anytime to 8370 and could be even below. But my stop loss would be somewhere around right shoulder 7900. Will keep you guys updated if there is any false sign of breakout to this pattern which is also possible in some cases but only time would suggest that so risk takers should surely start buying on dips for next few weeks and hold till diwali
Finally today both the averages, Nifty and Nifty Bank, have converged at on charts! Until yesterday Nifty bank was under-performing Nifty by almost 1% but that gap has been filled up today where Nifty bank out-performed Nifty with almost that same lagging difference. Indicators are yet showing some strength for the bulls on weekly charts but today markets closed near strong resistance on the channel line.
Though it doesnt mean that markets would fall from here but surely a big move is coming either way from tomorrow. Looking at the IIP and CPI just released, it seem we shall see some more movement upside but 8577 is strong resistance for Nifty where its recommended to book partial profits while above the same we may see 8700 levels. For Nifty Bank 18700 is strong resistance while above the same we can get 18950. Indicators are already overbought but looking at derivative data we may see some more positive movements. Though for traders i would always recommend stock specific trading rather than Index specific.
Nifty bank has been a under-performer in last two weeks compared to Nifty Index. But now looking the pattern on Nifty Bank daily chart is moving in a strong up channel and is appearing Upper resistance line while Nifty has already reached that trend line on similar pattern today.
Technically, indicators have also given internal signal line crossovers to show still valid momentum for the upside on Banking Stocks and Index. News from offical sources say that Government may soon infuse capital in PSU Banks which could fuel rally in the index. Though going fresh longs at CMP would be bit difficult as Risk:Reward Ratio aint favorable but those who have a long position can hold with the targets of 18700 on the Bank index. While for a trailing SL can be at 17930.
Weekly channel which i mentioned last week is still intact and the range which was crucial for breakout has not been breached yet signalling a tight range bound movement this week. While being volatile Nifty almost burnt fingers for day traders. Technically speaking, Nifty weekly chart is showing mixed signs which means cautious view to be continued….
Looking at indicators on weekly chart still momentum seems to be continuing for the upside rally as MACD is just crossing over zero line which considered to be buy a signal and even looking at the global cues last night we can be rest assured than we shall breach channel resistance line on monday which is at 8418 now! But the most dangerous sign on the card is bearish crossover of 50 weeks average below 100 weeks average before 3 months which is still not reversed. Secondly daily candles are not showing any signs yet of convincing upmove! Such time in history are considered to be volatile and we are experiencing the same moves currently. But to get more biased on the breakout, option markets are suggesting a strong upmove in coming months as Put writing is witnessed most at 8200 while fresh call writing was seen at 8700 so the strategy would now be going long blindly on channel breakout at 8418 next week with 8265 as Stop loss.
Nifty has been quite volatile since last few weeks but during this course it has created a upside sloping channel on weekly charts as marked in the attached chart. Momentum seems to be strong for the upside rally in coming week or two as indicated by weekly indicators. But now daily charts are bit confusing to our weekly momentum or may be we can say that markets could resist at 8400 level which is the next week channel resistance level on weekly charts. We have got a shooting star on daily charts on Friday which is creating some sign of caution to traders!
So may be i would recommend now to be cautious on initiating a fresh longs from current levels but rather we may hold c/f longs with sl of 8265 and may be book profits on long around 8400 anytime next week before going shorts. So as of now my recommendation is to wait and watch for 8400-8265 range to square off existing longs before initiating any fresh positions on Index.