Technical & Derivatives Report
Exhibit 1: Nifty Daily Chart
After Monday’s massive sell off, markets were a bit oversold and
since there was no negative development on the global as well as
domestic front, we started the session higher. As the day progressed,
the buying momentum kept on accelerating in some of the high beta
counters (who were among the major casualties on Monday) to
recoup half of its previous day’s losses. Eventually BANKNIFTY ended
the session marginally below the 31800 mark. Tuesday’s move was
quite similar to the spring action after taking a solid knock of Five
percent during Monday’s session. Many market participants seemed
to have started calling this as a bottom and began participating
aggressively on the long side. Their anticipation might be right also
but we do not want to immediately get carried away by this move,
rather would wait for any kind of sustained follow up buying. In our
sense, Tuesday’s sharp rebound in banking space was due to extreme
oversold position and importantly, it was merely a technical
adjustment to compensate the massive correction in IT counters led
by TCS post its earnings. We would consider this as a bounce back
move and hence, we are not completely out of the woods yet till the
time 33000 – 33500 levels are not surpassed convincingly. In
addition, looking at the rising value of ‘ADX (14)’ indicator on the
daily chart along with ‘Negative DI’ sloping upwards, indicates bear
grip on the space at least in a shorter run. Hence, it’s better not to
jump on to any conclusion immediately, and use rallies to lighten up
longs. On the higher side, 31900 – 32300 are to be seen as intraday
hurdles; whereas on the flipside, 31360 – 31000 can be treated as
immediate supports.
Key Levels
Support 1 – 31360 Resistance 1 – 31900
Support 2 – 31000 Resistance 2 – 32300
On Tuesday, Nifty started marginally positive and approached the level
of 14450 in the first hour of the trade. This level coincided around the
previous support which now was the immediate resistance. The index
hesitated there and pared the gains before noon itself to sneak below
14300. The index consolidated for a while in a range and when it
looked that the market was unable to sustain at higher level, the index
once again made an attempt to surpass the morning highs. With the
help of the Banking and Financial space, Nifty rallied sharply in last
couple of hours and ended the day tad above 14500, marking gains of
almost 200 points.
We have already seen a week full of action in a couple of sessions with
indices showing sharp swings on both the days. Nifty breached its
short term support on Monday, but it reclaimed the 14500 mark next
day. The sharp recovery certainly seems enticing, but still we advise not
to get carried away as we may still not be out of the woods. The
bearish gap area and the ‘20-day exponential moving average’ at
14650-14700 remains a sturdy wall which could be difficult to surpass
Exhibit 2: Nifty Bank Daily Chart
On the flipside, the ‘89 DEMA’ has played its role well as of now as
Nifty did not breach that and Monday’s low almost coincides with that
support. With above mentioned levels on the tab, traders should look
to lighten up longs on pullback as the index approaches its resistance
zone.
Key Levels
Support 1 – 14300
Resistance 1 – 14650
Support 2 – 14240 Resistance2 – 14700