By Rohan Patil
Since April 5, the Nifty 50 is trading in a lower high lower low formation and whenever prices retrace near its 21-day exponential moving average which is placed at 15880 levels we find a strong resistance and the price drifts lower after. On the weekly chart, the Nifty is forming a lower high, lower low pattern, indicting the negative undertone of the index.
If we closely observe the pattern from the past three months, the prices on the previous three occasions have witnessed a massive gap down opening and post that we have seen partial retracement gap filling and post that index again resumes its downward journey.
On the indicator front, momentum oscillator RSI (14) is forming lower bottom since October 2021 and continues to follow the same. Currently, RSI is settled below 40 levels on the daily as well as a weekly time frame with bearish crossover. FIIs were the net seller for June where net sell was around Rs 58,112 crore and net buying by the DIIs is worth Rs 46,599 crore. Overall, Rs 11,500 crore selling was visible from the FIIs which indicates pressure on the equity market.
Global cues will play an important role in the overall direction of the market where commodity prices, the situation on the Russia-Ukraine front, and economic data will be important. On the domestic front, monthly auto sales numbers and monsoon development are key triggers.
We feel that the current trend in Nifty is bearish to range-bound between 15300 and 15900. If the Nifty breaches below 15300 levels, prices may drag to 15000 levels. Our bearish view will be negated if the Nifty closed above 16000 levels.
Bank Nifty support at 33,000
Bank Nifty traded flat for the entire last week and kept traders on the sidelines due to the high volatility. The gap created on June 13 is partially filled and acts as immediate resistance for the Banking index.
The prices continue to trade below their 21 & 50-week exponential moving average on the weekly as well as the daily charts. The momentum oscillator RSI (14) on the weekly chart has formed a bearish range shift and is reading between the range of 60-20 levels.
The banking index on the daily chart has formed a smaller degree rising wedge pattern and prices have taken support near the lower band of the pattern which is placed at 33200 levels. The MACD indicator is reading below its line of polarity and below its signal line too and the slope of the MACD is moving lower.
The support for the Bank Nifty is placed near 33000 levels and if prices close below the same then 32600 levels will be to watch out for. On the higher side the immediate resistance for the index is placed at 34200 levels and above those 34800 levels.
Target: Rs 16750 | Stop Loss: Rs 14850
The prices have formed a strong basing formation from the level of 13000 to 14000 where the benchmark was forming a lower low formation. The stock is outperforming the benchmark index from the last couple of weeks on a relative basis, where the benchmark index is forming a lower low and the counter has broken its 200-day exponential moving average which is placed at 14600 levels.
On June 29, prices witnessed a breakout of an inverted head & shoulder pattern above its neckline which is placed at 14800 levels with above average volumes on the daily scale.
The majority of the indicator and oscillators are indicating a bullish momentum and looking at the overall auto space majority of the auto stocks are performing well. The counter is also trading near the upper band of the Bollinger band on the daily chart which indicates a possible continuation of the uptrend.
Maruti Suzuki India: BUY
Target: Rs 8900 | Stop Loss: Rs 8065
MARUTI on the daily chart has given a rectangle pattern breakout and post that prices are continuously showing strength on the higher side with positive uplift.
The prices have made one attempt to break out of the consolidation box during February 2022 but it failed and again drifts lower towards the lower levels of the pattern. In this current prices have again made a successful attempt of the breakout and prices are trading above their trend line resistance.
The counter is strongly settled above its 21 & 50 – DEMA which is placed at 8024 & 7860 levels respectively. Recently the RSI has also witnessed a range breakout above 60 levels with positive crossover on the daily time frame.
(Rohan Patil is a technical analyst at Bonanza Portfolio, Views expressed are the author’s own. Please consult your financial advisor before investing.)