Technical & Derivatives Report
Nifty Bank Outlook - (19969)
During the week gone by, the bank index marked a recent
low of 16116 on Tuesday and then along with the broader
markets triggered a strong bounce back to end the week tad
below the 20000 mark.
The said bounce back was on cards as the momentum
oscillators were in deep red and now with the RSIS
smoothened confirming a positive crossover in deep oversold
territory; we sense the bounce may continue in the near term
towards 20850 and 22000 mark. On the flip side, immediate
support is placed around 18780-18000 levels. The volatility is
likely to remain high and hence one should have a stock
specific approach with proper exit setup.
Support 1 – 18780 Resistance 1 – 20850
Support 2 – 18000 Resistance 2 – 22000
Exhibit 1: Nifty Daily Chart
Last Friday’s decent recovery was followed by a huge gap down
on Monday as there was sudden spike seen across the globe as
well as in India in corona virus infected numbers. The sell off
along with global peers augmented to hit a fresh 3-year low at
7511.10. Things looked extremely scary at one point as so many
stocks were falling as if there is no tomorrow. Few all time
favorites like HDFC Bank, Bajaj Finance etc. considered as a safe
haven stocks also had to succumb to this melt down.
Fortunately, the global markets saw sharp recovery thereafter
which resulted into a respectable rebound in our market as well.
Eventually, the Nifty ended the action packed week by paring
down almost all losses.
Barring Monday’s mayhem, our markets managed to clock gains
for four consecutive sessions, which was rare to see in last couple
of months. But practically speaking, all markets across the globe
were extremely oversold and hence they needed some reason to
rebound. Globally the relief move started after the
announcement of hefty stimulus packages from US Federal
Reserve. Looking at the governments and central banks’ efforts
worldwide, hopes were built for similar sort of measures from
our Finance ministry and RBI as well to support the economy.
Finally, the sell off arrested and we are now considerably off
Monday’s low. Technically speaking, the Nifty has managed to
close above ‘5-day EMA’ after so many days. In addition, the RSI-
Smoothened on daily chart has confirmed a classical positive
crossover from deeply oversold position. Purely looking at these
observations, a possibility of extending this relief move towards
9150 – 9350 cannot be ruled out.
Exhibit 2: Nifty Bank Daily Chart
But as we all know, we are currently in a very abnormal phase and
hence, all conventional theories of market research can go for a
toss. So rather than blindly depending on these pointers, the real
path of action would be decided on how things pan out with
respect to the corona virus pandemic. As far as supports are
concerned, 8500 followed by 8000 would be seen as key
supports. Traders are advised not to take aggressive / leveraged
bets and should ideally keep booking profits on a regular basis.
For a time being, the strategy would be to take one step at a time
and keep focusing on quality names. The entire world is fighting
against this health crisis and we hope it disappears soon.
Support 1 – 8500 Resistance 1 – 9000
Support 2 – 8000 Resistance 2 – 9150