The outlook for Nifty remains positive from the short term perspective till the time the support levels are not breached on the downside.
By Tejas Shah
The Nifty lost 116 points over the previous week to close at 15,683. It started on a positive note considering global cues last week but couldn’t sustain and cross 15,900 levels and fresh selling was witnessed towards the middle of the week, where the bears took control of the markets. The second half of the last week was pretty volatile and there was a sharp recovery from the major support zone of 15,550-600 towards the end of the week ie on Friday.
The candlestick (Hammer) pattern formed on the daily chart is an encouraging one. It was a volatile week after a positive opening and neither the bulls nor the bears wanted to give up. The positive key take away for nifty is that it is holding above the major support level of 15,600 on a closing basis.
The Nifty Small Cap 100 Index hit a new lifetime high (9,824) during the last week. The market breadth remained weak during Friday’s trading session as 33 of 50 stocks in the Nifty declined. The broader market relatively underperformed during the last week as Nifty Midcap 100 and Nifty Small cap 100 indices lost 3.05% and 1.81% respectively. Volatility increased a bit. India VIX climbed 4.93% to 14.80 on a weekly closing basis.
Presently, the Nifty Index is respecting both the support and resistance levels. The Nifty is still forming higher tops and higher bottoms both on the daily and weekly charts, which is a positive signal as per Dow Theory. The bulls are in full control of the markets at the current juncture and are using every dip to create long positions. The short term moving averages are below the price action and should continue to support the indices on any decline. The Nifty is trading around a make or break support zone of 15,550 to 15,600 levels and a sharp movement of 2% to 3% can be expected on either side from this zone, preferably on the higher side.
The outlook for Nifty remains positive from the short term perspective till the time the support levels are not breached on the downside. The levels of 15,600 and 15,450 are short-term supports. These support levels can be used as a strict stop loss for existing long positions. On the higher side, immediate resistance for Nifty is at 15,800 levels and the next major resistance zone is at 16,000-100 levels.
Bank Nifty technical outlook
The Bank Nifty was an underperforming sector and it was also partially responsible for dragging Nifty lower during the last week. The Bank nifty is not allowing the market to go higher and any daily / weekly closing below 33,500-600 levels will indicate further weakness in Bank Nifty. We need to see more firmness in Bank nifty for further strength in Nifty.
On the downside, immediate support zone for Bank Nifty is at 33,900-34,000 levels and the next major support zone lies at 33,500-600 levels. The support zone of 33,500 to 33,600 holds a lot of significance since multiple technical studies and indicators are suggesting this area as a very strong support zone in terms of ST Moving average support, Breakout Candle low, Fibonacci Retracement Levels etc. (61.80% Fibonacci retracement level of the entire rise starting from 32,115 levels (14th May low) to 35,811 levels (4th June High) on the daily chart). On the higher side, immediate resistance zone for Bank Nifty is at 35,300-500 and the next resistance zone is at 36,400-500 levels. Broadly, Bank Nifty is trading in the range of 34,000 to 35,800 levels for the past four weeks after the positive breakout which took place above 34,100-300 levels in the month of May 2021.
The Banking index has been very range-bound in the recent past (4 weeks) but is now setting up for a monster move. We are of the opinion that unless and until the Bank Nifty does not close below the level of 33,500, the outlook remains positive from the short term perspective.
Reliance Industries in focus
The AGM of the index giant Reliance Industries Ltd. (RIL) is scheduled for the 24th of June that will keep the traders and market excited about the outcome. Technically, the outlook for RIL is positive since the stock is forming higher tops and higher bottoms on the daily chart and it is also trading above short term and long term moving averages. Any outcome in terms of positive result or announcements can take the stock higher and will also give support to the market since it is an index heavyweight.
The Technology, FMCG, Banking and Pharma sectors are likely to outperform.
Glenmark Pharma Ltd.
Buying can be initiated in Glenmark Pharma Ltd. at CMP (640) for the upside Target 1 of Rs. 675 and Target 2 of Rs. 705 in the next 8 -10 sessions. Place a stop loss of Rs. 619.
Tata Power Ltd.
Buying can be initiated in Tata Power Ltd.at CMP (121) for the upside Target 1 of Rs. 135 and Target 2 of Rs. 150 in the next 4 -6 weeks. Place a stop loss of Rs. 114.
Ultratech Cement Ltd.
Buy only on a move above 6755 with a stop loss below 6550 for a short term target of 6975 and 7150. (Conditional Call)
(Tejas Shah is the AVP & Technical Analyst at JM Financial Services. Views expressed are the author’s own. Please consult your financial advisor before investing.)