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.
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.
Sometimes patterns wont be perfect but still its says that “I-M-Perfect”. Though today many technical analyst wont notice circled pattern as perfect evening star pattern but i would say that this COULD be imperfect evening star pattern and could give some points reversal if not as much as a perfect pattern would give from such a peak. If we talk about some factors to support this imperfect pattern, 1) Recent Rally: We have almost got 600 points rally from low in prior 12 sessions so now its time for some correction to this Rally. 2). Overbought on daily: Indicators on daily charts are overbought suggesting some sell-off though weekly indicators are yet not signing any sell-off which means that any correction in next few sessions would be a strong opportunity for medium term traders to go long but traders can trade short. 3) Sector weakness: Few front line sectors having weight-age on index are also showing weakness on charts such as Nifty IT and Nifty FMCG. 4) Economy situation: As rajan said in recent policy that we have fear of short term chances of inflation which may have some sentimental sell-off. So to end, we can expect some profit booking for short term trade but overall trend still remains intake. Support on downside: 8081,7935 while resistance on upside 8265 on closing basis.
Nifty has given a wonderful run over 7772 which was my trigger for buy as i mentioned in my post on 25th May (Bears Sucked out completely) and target of 8265 was given on 26th May (IPL Fever on D-street). Though my target was left by just 3 points on Friday but we should have margin of safety of +/-5 points . After such a movement we must a get a interim profit booking to almost 8100 levels. But those who only trades long and safe trades must hold existing position for my second target of 8450 but it might take some time. But FnO traders and risky traders must pull up your sleeves tomorrow for a fresh shorts. As we all could notice in the attached graph that we have a got a “Red candle” at the top with recent high volumes and a trade below 8209 would trigger a fresh shorts for traders in coming weeks. On the downside targets are 7989/7925 and stop loss on upside is 8270. But remember that we should only go short below 8209. And safe traders should just hold longs for medium term but book partial profits below 8209. So all should trading according to your view. Stay cautious for volatility mood.