Technical & Derivatives Report
US markets were cheerful previous night so as yesterday morning
(Dow Futures) after the oath taking ceremony of Joe Biden as 46th
US President. This clearly had a rub off effect on our markets as
well. BANKNIFTY started the session higher and then extended
gains to clock fresh record high of 32842.30 at the midsession.
However, all of a sudden the selling augmented in the market after
2 pm to not only pare down all gains but also to close well inside
the negative territory. BANKNIFTY was enjoying its northward
move in the first half and everything looked hunky dory until the
nosedive started in last one and half hours of trade. It is hard to
gauge what triggered this sell off but probably it started after the
disappointing set of numbers from Bandhan Bank. May be it’s just
a broad based profit booking that coincided around the same time
on the weekly expiry day. Reason could be anything, but as
mentioned in our previous commentary, 32700-33000 is to be
seen as strong resistance and yesterday’s sell off exactly triggered
after entering this zone. Since we can observe 3-points negative
divergence in ‘RSI-Smoothened’ in all major indices, one should
avoid aggressive longs. On the lower side, 32000 can be
considered as key support, below which we may see some
extended correction.
Key Levels
Support 1 – 32000 Resistance 1 – 32700
Support 2 – 31800 Resistance 2 – 33000
Exhibit 1: Nifty Daily Chart
The Nifty index opened on a positive note and surpassed the 14750
mark for the first time. It consolidated at higher level for most part
of the session, however, the indices corrected sharply after 2 pm and
Nifty ended the day tad below 14600.
During most part of the day, the indices were trading on a positive
note and the Nifty even marked a high over 14750. However, the
weekly expiry session resulted in some serious profit booking in the
later half and both Nifty as well as the Bank Nifty not only wiped out
its morning gains, but ended the session in the red. On the daily
chart of Nifty, we can observe a negative divergence between price
and the RSI oscillator as the price has surpassed the recent swing
high and has made a ‘Higher High’, but the RSI has made a ‘Lower
High’ in the same time frame. This divergence, and the profit
booking that we saw in the broader markets in the later half
yesterday indicates that although the trend is positive, one should
look out to book profits on the long positions and avoid aggressive
positions for time being. The Banking index has consolidated within
a range of 32860-31690 in last few sessions, and a breakout beyond
this range could then lead to a directional move in this space which
could drive the momentum in Nifty as well.
Also, the Midcap index is trading at a crucial juncture around the
resistance as per Fibonacci ratios. Hence, until we see a follow up
buying above this week’s high, some bouts of profit booking could
be seen in this space too. Hence, we continue with our advice for
traders to look for stock specific trading opportunities and also focus
on timely exits on trading positions. As far as levels are concerned,
the supports for Nifty are placed around 14500 and 14410 whereas
resistance is seen in the range of 14700-14750.
Key Levels
Support 1 – 14500 Resistance 1 – 14700
Support 2 – 14410 Resistance2 – 14750
Exhibit 2: Nifty Bank Daily Chart