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.
WHAT IS BREXIT?
A referendum wil be held on Thursday 23 June, 2016 to decide whether Britain should exit (Britain’s Exit – hence the term Brexit) or remain in the European Union.
WHO WOULD VOTE?
The votes in which everyone ( or nearly everyone) of voting age can take part, normally giving a ‘Yes’ or ‘No’ answer to a question. The side which gets more than half of all votes cast is declared as a winner.
All British, Irish and Common wealth citizens over 18 who are the resident of U K, along with U K nationals living abroad who have been on the electoral register in the UK in the past 15 years.
A decision to leave, this would be a first by a member nation.
The European Unification
The European Economic Community was launched in 1958. It became the European Union in 1993. The Euro Currency was created in 1999.
If there are majority votes – in favor of LEAVE Britain
THE LEAVE VOTE :-
ØThis would deepen the crisis facing a continent already struggling with economic weakness, debt problems, large-scale migration and growing geopolitical instability to its south and east.
ØWithout the U.K., which alongside France dwarfs the military capacities of other member states, the EU’s defense, security and diplomatic capabilities would be hit. Only Britain and France have sizable expeditionary forces, nuclear weapons and United Nations Security Council vetoes.
ØBritain’s Exit from EU will have major repercussions for Britain, EU as well as economies across the world.
ØIncreased Paperwork: EU citizens in Britain and Brits living in other EU nations would have to update their immigration statuses. Companies working in both the UK and the EU would have to verify that they’re compliant with two sets of laws.
ØBlow to UK Economy: The UK government estimates say that Brexit could cause the country’s economy to be between 3.8 and 7.5 % smaller by 2030.
ØThreat to UK’s ‘United’ Status: Brexit could encourage England, Wales, Scotland or Northern Ireland to appeal for quitting United Kingdom.
ØRipple effect for global economy: The United States will bear the major brunt of a Brexit being UK’s biggest trading partner. President Obama has warned that it could take 10 years for Britain to negotiate a new trade deal with the US Goldman Sachs, JP Morgan, Morgan Stanley and Citi group together have contributed to the anti Brexit campaign.
If there are majority votes – in favor of STAY Britain
THE STAY VOTE :-
ØIf Vote works in favour of Britain then Britain would get a special status within the 28 nation club.
ØMigrant Welfare Payments: Cutting the amount of benefits for low paid migrant workers from EU nations will dissuade them from flocking to UK in large numbers. Migrant workers, however, will still be able to send child benefit payments back to their home country.
ØKeeping the pound: Britain will never join euro and has secured assurances that the Eurozone countries will not discriminate against Britain for having its own currency.
ØProtection for London’s biz: Safeguards for Britain’s large financial services industry to prevent Eurozone regulations being imposed on it.
ØRunning its own affairs: For the first time, there will be a clear commitment that Britain is not part of a move towards even closer union with other EU member states – one of the core principles of EU.
The mixed reviews of EU countries
NOT IN FAVOUR:-
- A Pew Research Centre survey published this month showed levels of disapproval of the EU in many countries as high as or higher than in the U.K.
- In the Netherlands, 46% had an unfavourable view of the EU; in Germany and the U.K., 48%; in Spain, 49%; and in France, 61%.
MIXED REVIEW OF EU COUNTRIES:-
Source:- Pew Research Centre of Global Attitudes Survey, The Wall Street Journal.
If Britain Exits – its impact on India
IMPACT ON INDIA:-
ØWith Euro losing one of its stars, India too can feel sighed.
ØRupee may depreciate due to double effect of foreign fund outflow and dollar rise.
ØThis will increase petrol and diesel prices to an extent.
ØThe government may want to reduce additional excise duty imposed on fuel when it was on a downward trajectory. This will increase fiscal deficit, unless revenue increased.
ØPrices of gold, electronic goods, among others will increase.
ØCheaper rupee will make Indian exports including IT and ITes, competitive.
Disclaimer: This is my personal view so reply on them at your risk
We have seen some surprising pull back from the lows on Nifty which was surely not expected in such a quick manner. Though overall trend for the mid term seems to be positive but Nifty was trading in a downside channel on the daily chart which has been breached today with heavy volumes moving back towards a medium term positive trend outlook. Though still 8265 has not been breached on the upside but looking at the momentum it feels we should do the same soon. Until now i was just recommending longs on stocks but now it seems we can go long on indices after we move beyond 8300. Though i wouldnt take any risk on naked futures as Brexit is still lingering. Overall Nifty has closed back above all short term averages and now the resistances seems to be around 8577 if we sustain 8200 for this expiry
In my last post i mentioned about probable evening star pattern on 9th June and its still holding its importance on Nifty chart. But to support its significance we have got two more components now. Firstly, We got shooting star candle as squared in the chart and secondly, now Nifty has confirmed its path in the channel with is trading downwards. Though my overall mood is positive for a view of 6 months but minor correction was expected as i mentioned in last post and my first tgt 8081 has been achieved while now my second target is active which is 7935. But the stop loss remains the same at 8265 on closing basis. May be a intermediate support might be at 8040 which is channel support line. Being BREXIT nearby, its always advise to hedge your position where as in our case we can buy 8300 CE to hedge our short on Nifty.