By Rohan Patil
The benchmark index witnessed a brutal selling and broke its important short term support and closed with a loss of more than 5 percent on the weekly chart. Index closed below its 52- week low on Friday’s session and breaks its important support which is placed at 15400 levels. For the first time since July 20, Nifty closed below its 100 – week exponential moving average and it’s a bearish sign for the index. Prices have formed a bullish ABCD harmonic pattern at 15350 levels but the impact of selling was so forceful that prices closed below that level. We are still within the range of potential reversal zone and a sharp bounce back from the current level cannot be ruled out.
On the Friday’s session there was indecision among the traders and a result of that is prices have formed a Doji candlestick pattern on the daily time frame. Prices on the daily chart have closed below its (21, 50 & 100) day exponential moving average. AS the indicator on the smaller time frame are extremely oversold so hence next session can belong to bulls but short term traders are advised to wait for more stability before initiating a trade. The immediate support for the index is placed at 15150 & 15000 levels and if prices sustain above 15400 levels than 15650 can be a possible upside levels for the index.
Since the gap down opening on 13th June Bank Nifty never retested its higher levels and continues to trade lower for the entire week and closed 5 percent down on the weekly closing basis. The Bank Nifty was trading in falling wedge formation combined with lower high pattern on the daily chart and in this brutal fall prices are approaching near its lower band of the pattern. Banking is also sustaining below its all the important averages on the daily chart which indicates a strong bearish trend is unfolding. The momentum oscillator RSI (14) on the daily scale has formed a double bottom formation near oversold levels which indicates possibility of a pullback in the coming trading sessions.
From the past few weeks we are experiencing a distribution pattern in the Banking index from 36000 to 34000 levels and prices have formed a small degree rounding top formations on a couple of occasions. As the indicator on the smaller time frame are extremely oversold so hence next session can belong to bulls but short term traders are advised to wait for more stability before initiating a trade. The immediate support for the Banking index is placed at 32000 & 30500 levels and if prices sustain above 33600 levels than 35000 can be a possible upside levels for the index.
Target: Rs 274|Stop Loss Rs 241
In the previous week, we saw prices had given a breakout of a trend line on the weekly chart which was placed at 260 levels. And post breakout prices have completed its throwback which is close to its trend line support. The prices have also formed a bullish hammer candlestick pattern 15th June near its trend line support. The Stock is trading above its 21 & 50 – day exponential moving average which is placed at 259.8 & 246 levels. Previously when price retraced near its 21 DEMA it witnessed a strong reversal on the upside. Looking at the broader time frame prices have given 28 weeks consolidation breakout and the counter is well sustained above its trend line support. In addition the breakout was witnessed with above average volumes.
Target Rs 464|Stop Loss Rs 411
After a steep fall prices have formed a bullish engulfing candlestick pattern on the daily chart and prices have witnessed a strong rebound from the 163 levels and rallied more than 5 percent in a single day. The prices have also made a double bottom formation on the daily chart and the recent rally has formed the counter to close above its 21-day exponential moving average. On the weekly time frame prices have formed a long tail on the lower side and a tiny body on the higher side indicates a reversal from the lower levels might continue ahead. Furthermore, Friday’s candle has engulfed its previous four days’ candle and has shown a strong basing formation near the lower levels.
(Rohan Patil is a Technical Analyst at Bonanza Portfolio. Views expressed are the author’s own. Please consult your financial advisor before investing.)