Why Nifty’s bearish signals indicate start of a strong up trend; Bank Nifty could slip under 43,000

Despite bearish signals on the technical charts, Nifty 50 is poised for a strong up trend. Bank Nifty could see positive momentum as well.

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If Bank Nifty is unable to scale 44,150 or slips past 43,550, it could call for 42,800 levels.

By Anand James

We are heading into the expiry week with 74% of Nifty 50 stocks having announced their results, of which 67% have declared profits. Weekly changes were modest with gainers dominated by Realty and IT recording 1.3% and 1.2% on their respective indices, which were outflanked by oil & gas, utility and power sectors all of which lost more than 2% on their respective indices. 

As last week drew to a close, 47% of F&O segment stocks found their longs unwound, with short build up seen in 23% of stocks. So, almost 70% of F&O segment stocks showed a negative bias. Meanwhile, 37% of NSE 500 stocks still closed above 15 May peaks, when Nifty last saw an interim peak.

Since coming close to our weekly target of 18,500 early last week, NSE Nifty 50 saw lower lows on consecutive days for the rest of the week. This is obviously a bear signal. However, there are two reasons why this is not a bear move, but instead the start of a strong up trend. Firstly, Friday’s bounce off 18,060, the consolidation support formed in the early part of May, hints that bulls are attempting to regroup, after a decent 2% drop from the top. Secondly, the reclaiming of 18,200 on Friday suggests that bulls did not get intimidated by this key level, and is now enroute 18,660. However, if 18,270 appears too stiff an obstacle to cross next week, expect 17,970 before getting back on to the 18,660 move again.

Bank Nifty, which had looked exhausted at the start of last week, having come close to the record peak of 44,150, looks better off, having found buying interest after slippage. Presence of several bullish continuation patterns in the hourly chart encourages us to remain positive. However, inability to scale 44,150 or outright slippage past 43,550, could call for 42,800.

USDINR does deserve a mention, going into next week, as a significant breakout if underway. Only two weeks back, USDINR was seen idling in the 81.6 vicinity. The advances there after have been steep and sustained and are poised to see 83.25. Given the steepness of last week’s moves, we will keep the downside marker at 82.55.

(Anand James, Chief Market Strategist at Geojit Financial Services. Views expressed are author’s own. Please consult your financial advisor before investing.)

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First published on: 22-05-2023 at 09:16 IST