By Anand James
Holidays, derivatives expiry and approaching budget sessions ensured that buyers had little to look ahead, even before the week began. Incidentally, rejection trades dominated on most days. However, the turns lower thereof never gained speed and the prime reason for the same is the presence of the 50day SMA nearby for both the key indices, which has successfully allowed a regroup of bulls on Thursday.
However we have managed just 50% retracement of recent falls and there is not much to rejoice in terms of bullish confirmation. Yet, we hope to build on Thursday’s momentum, and look for 21500-560 initially, stop and reverse for 20900.
We would consider out and out bullish bias only on a close beyond 21800. Nifty Bank staged a solid recovery on Thursday, but as is the case with Nifty, it has not excited us. We prefer to go in next with a limited upside objective, but are willing to broaden the horizons, should we push above 45420. Downside markers, until then, may be placed near 44700.
In short, the major play next week would be to anticipate or set up for the eventuality that last week’s fall that could easily have evolved into a collapse did not end up so, only out of respect to the adjacent 50day SMA.
Whether the same respect will be retained going ahead, would also depend on the extent of rejection trades that would be onset on approach to levels that have been defended pretty easily. This time around VIX has gone up to near 15s. In a way, it is good that way, as we do not enter the budget week on a low volatility note, which would have been catastrophic in the event of a surprise.
This way, with VIX higher, the surprise element is that much more reduced. Vote on account is not slated to trigger a surprise though anyway, but with Fed narratives continuing to vacillate, VIX’s rise has prepared us for wider downside expectations that we would otherwise have. The 20900 and 44700 levels for Nifty and Bank Nifty respectively are pretty conservative markers, which we hope not to readjust within this week.
(Anand James, Chief Market Strategist at Geojit Financial Services. Views expressed are author’s own. Please consult your financial advisor before investing.)