Nifty Bank Outlook - (23754)
On the back of positive global cues, the Bank Nifty opened gap up
yesterday and surpassed the 25000 mark. However, the index started
correcting after a few minutes of positive traction and it plunged to
correct more than 1800 points from the day's high and end with a loss
of over 3 percent from Friday's close. In the last few sessions, Bank
Nifty has taken the leadership to drive the markets higher and has
rallied sharply to cover up its recent underperformance. This
continued yesterday in the opening ticks as well, but there was a major
hurdle at its '200 DMA' which it hadn't tested in the last six months.
The resistance played its role and then we witnessed a sharp sell off
from the highs along with the broader markets. Technically, this large
body candle has led to formation of a ' Dark Cloud Cover' candlestick
pattern which indicates a shift in momentum to the downside. Thus,
from a near term perspective, traders should stay light on positions
and use pullback move as an opportunity to exit from long positions.
The immediate hurdles are seen around 24125 and 24500 whereas
supports are placed around 23210 and 23000.
Key Levels
Support 1 – 23210 Resistance 1 – 24125
Support 2 – 23000 Resistance 2 – 24500
Exhibit 1: Nifty Daily Chart
Yesterday morning, the global set up was just ideal for our markets to
have a head-start for the new trading week. At the opening, we started
with a decent bump up to mark a new six-month high. Subsequently,
for an hour or so, markets remained in this bullish zone and post this, it
just turned out to be one of the terrible days in the recent past. The sell
off mainly triggered after the news of India-China clash once again
taking place at the border. This resulted into a massive liquidation in our
markets by continuing sell off throughout the remaining part of the day
to eventually conclude with a massive cut of 260 points from the Friday’s
close (and more than 400 points from morning high).
The way the market plunged yesterday post the cheerful opening, it
finally gave some justice to our recent cautious stance. Since last week
or so, we were sounding a bit contradictory and have been advocating
booking profits continuously in the rally. It might have sounded a bit
repetitive but this is how the market surprises us and hence, it’s better
to be proactive at times; because when the market takes a U-turn, it
happens all of a sudden and does not give much time to react to the
development. Yes, nobody can predict what will trigger the selloff; but
the velocity at which it falls, it can be very intimidating for momentum
traders at least. So. It’s all advisable for traders to take some money off
the table when the market turns euphoric. Now with yesterday’s
development, 11750-11800 has now become a sturdy wall and we do
not see it breaking upwards immediately. Before this, in case if Nifty
gives a rebound towards 11500-11600, one should use it as an exit
strategy for existing longs. On the downside, Nifty has now reached a
key support zone of 11300-11250. The moment we breach this (which
looks on cards), get ready for an extended correction towards 11100-
11000 in days to come.
Exhibit 2: Nifty Bank Daily Chart
Yesterday, barring IT, no other sector was spared; in fact, the recent
driver, Banking has taken a solid toll after precisely testing it’s ‘200-SMA’
early in the morning. The major casualties were seen in the broader
market, who were enjoying a strong Bull Run since the last few weeks.
We reiterate that we were cautious because the market had become
complacent and when things become hunky dory, the market tends to
give some reality checks soon and this is exactly what we witnessed. By
saying all this, we are not all expecting a similar kind of sell off (no way
closer) that we witnessed in March. In fact, if the correction extends, it
should be considered a healthy one with a longer run and would provide
better opportunities for those who are sitting on the sidelines.
.Key Levels
Support 1 – 11300 Resistance 1 – 11500
Support 2 – 11250 Resistance 2 – 11600