Nifty
NIFTY: 25693.70 In our previous update, we indicated that the index remains biased on the downside and only a move above 24980 – 25030 would negate the weakness and could suggest a bounce back to levels of 25400. We had also indicated that this was a less likely scenario and the odds are in favor of the decline extending to lower levels.
The announcement of US – India trade deal kind of reversed the immediate sentiment and movement. The Nifty opened the week at 24796, and declined to a low of 24679. The announcement of trade deal saw a massive gap up as the index moved to a high of 26341, before cooling off a bit and closing the week at 25693.
Going forward, it should be noted that a cluster of moving averages is located around 25500 levels. The immediate direction will be positive unless the index breaks below this zone. On the upside the supply pivot is around 26200 (from the earlier pattern line) and then tops around 26350 – 26370 levels. It is likely that the nifty trades withing these boundaries for the next few days, with an upward bias unless it closes below 25500. Only a close below 25500 would suggest some weakness and mild declines to levels of 25100.
Bank Nifty
Bank Nifty: 60120.55One of the most important observations to made on the charts of banknifty is the importance of 60200 – 60250 as an area where multiple intraday highs have been recorded (kindly refer the graph above).
Just like the Nifty Index, the banknifty also reversed with a huge gap up on the announcement of the trade deal, but could not sustain and close above the level of 60200 – 60250. In this entire process one positive is that the indicators have cooled off from higher readings (look at the MACD indicator in the chart above which has declined and is way off the higher overbought readings). A breakout from 60200 – 60250 if it happens could therefore enjoy good momentum support and suggest a retest of 6100 or 61500 (levels recorded post the deal announcement day).
The key moving averages are converging around 59500 zone and the outlook should be on the positive side unless the bank nifty closes below it. In case of such an event, the banknifty could be back to its broader range of 58200 – 60200.
Nifty Financial Services
Nifty IT Index: 35611.05 – This week we are once again featuring the Nifty IT index, which has stocks like TCS / Infosys / TECH M / HCL T / Wipro and other stocks as its main constituents. The Nifty IT index made a massive red candlestick, in a week when most indices moved up and closed with strength.
The nifty IT index opened the week at 38396, and moved to a high of 40301.40 before declining sharply to a low of 35211.95 and closed the week at 35611.05. Within the week multiple technical events took place. The short-term moving averages recorded negative crossovers as the 10-day EMA fell below the 21-day EMA which also fell below the 34-day EMA. The indicators also declined below their trigger lines on the 4 hour and daily charts.
All these negative crossovers suggest that the Nifty IT index could decline a bit more and the 2 important levels that we have marked on the charts are at 33700 – 33600 and 32400 – 32200. On the upside a reversal would occur only if the Nifty IT manages to move above resistance zone of 37150 – 37500 which looking at the direction of averages and indicators is a very low probability event.
Analyst - Mitessh Thakkar
President - Retail Research,
Bonanza Portfolio Ltd.
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