Technical & Derivatives Report
For the fifth straight session, the banking index opened higher in
tandem with the benchmark. Post the gap up opening, BANKNIFTY
consolidated with a positive bias and post the mid session, it started
moving higher to head towards the immediate zone of 23400-
23500. However, the expiry factor played out during the penultimate
hour as we witnessed a sudden nosedive in the market. Within a
blink of an eye, markets were significantly off highs. Eventually, due
to minor recovery towards the fag end, the index concluded the
weekly expiry at the 23200 mark.
Since the last week or so, we have been witnessing a relentless run in
the market and mostly the pessimistic traders were getting caught
on the wrong foot. But yesterday at one point, it appeared as if the
market is in no mood to correct and when everything looks hunky
dory, the market tends to surprise the complacent bulls. This is
exactly what we witnessed yesterday in the latter half. Now with
yesterday’s volatile swings, the daily chart depicts a ‘Shooting Star’
pattern precisely at the 61.8% retracement of the recent down move.
Support 1 – 23050 Resistance 1 – 23350
Support 2 – 22600 Resistance 2 – 23500
Exhibit 1: Nifty Daily Chart
Nifty started the session with another gap up opening well above the
11800 mark. It continued the momentum and even tested 11900;
however, some profit booking was seen in the penultimate hour due to
which the index gave up some of the gains and ended around the
opening levels, up by almost 100 points.
The U.S. markets had a run up overnight and amongst our domestic
news flows, the IT giant TCS announced its quarterly results which
obliged the market participants. This resulted in optimism at the open
and hence, we witnessed another gap up opening. Although the index
rallied to test the 11900 mark, the participation from the broader
markets was missing as the midcap stocks had a quiet day. Infact, we
witnessed some decent profit booking in the later half which resulted
in formation of a ‘Doji’ (indecisive) candlestick on the daily chart of
Nifty. If we look at this week’s overall price action so far, the indices
have rallied due to participation from the heavyweights (especially IT)
while the midcap index has consolidated within a range. The Nifty
Midcap50 index is at its crucial point around a trendline resistance
which is arrived by joining recent intermediate highs. If the index
manages to surpass this hurdle which is placed around 4775, then only
we should see a continuation of the rally from the broader markets.
However, until then its better to avoid aggressive bets and rather look
for stock specific opportunities which are participating in this upmove.
As far as index levels are concerned, the 20 EMA on the hourly chart
has not been breached in the recent upmove which is placed around
11745 and is seen as important support whereas the immediate
resistances are seen around 11900 and 12000 mark.
Exhibit 2: Nifty Bank Daily Chart
While IT space took the leadership again at the open to take the
benchmark higher, the midcap stocks witnessed some profit booking
and the Pharma names were buzzing in the closing hour. This indicates
more of a stock specific action in the market and hence, traders are
advised to focus on such stock specific moves from a trading
perspective. As mentioned above, the Midcap index is at a crucial point
and hence, traders should look to participate in this space only on a
breakout above the mentioned resistance level.
Support 1 – 11780 Resistance 1 – 11900
Support 2 – 11745 Resistance2 – 12000
Hence, a sustainable move below 23050 would probably apply
some brakes on the recent optimism; whereas on the upside,
23350 – 23500 are the levels to watch out for. Above 23500, the
bulls would be back in the driver’s seat.