Breakout above 11,100 may take Nifty to 11,400
The overall technical set up suggests that the broader market conditions may remain volatile.
SR. TECHNICAL ANALYST, INDIANIVESH SECURITIES
Where are we : For the past four weeks, the domestic markets have been oscillating in a broad range. Initially, the Nifty was stuck between 11,200-10,600 but now that range has been compressed to 11,100-10,740. Generally, such consolidation leads to a faster breakout on either side. Technically, we have observed that the price action of the recent week has helped the index to convincingly cross the previous week’s high. This has happened after 10 weeks which is an encouraging sign for the bulls and indicates that the bottom of 10,740 should be held for some more time and the Nifty could reach higher levels.
What is in store: A breakout above 11,100 on closing basis could lead to an upside towards 11,300–11,400. However, a breach of 10,740 would bring the bears back and pull the index back to 10,600 level. Considering the derivative data, the long and short ratio of FIIs in index futures has reached near 23 per cent — the lowest it went since February 2018 (which was around 18 per cent). Generally, we have witnessed a sharp recovery in the markets in such conditions. Thus, chances are high that the breakout might happen on the higher side.
What could traders do: With regards to individual stocks, we are witnessing a trend line breakout in Maruti, UltraTech and Hero MotoCorp. Any dips could be used to accumulate them for positional trade. On the contrary, UPL is the stock which we would recommend to sell. The current price action on the daily chart has taken a shape of “rising wedge” pattern, which generally occurs after a drastic fall and could be considered as a dead-cat bounce. Traders can create shorts in the stock between ₹578-582 levels for the downside target of ₹555 with a stop loss of ₹592.
LEAD TECHNICAL ANALYST, YES SECURITIES
Where are we : Undeterred by Thursday’s fag-end decline, Nifty marched ahead in Friday’s session. Rather than looking at the presence of supply line around three-digit Gann number of 111(00), it is now essential to focus on the overall market structure which continues to be positive. The trend which has caught our attention is the participation of broader markets (NSE MidCap 100 index up over 3 per cent since recent low of September 4). It’s no longer only large-cap driven market. We have seen different stocks and sectors participating in last few sessions (So this market is not driven by only handful of large heavyweight stocks) which makes it difficult to break the spirit of the bulls.
What is in store: Despite the strong Friday rally, range expansion is highly awaited and current consolidation could probably end in this week’s trade. A typical trend is observed in last two week’s trade i.e. buy on dips which underlines market strength and resilience. The index has completed three consecutive shifts in orbits post June peak of 121(00) and since last one month it is locked in tussle between three-digit Gann number of 106(00)-111(00). Broad based participation, churning of sectors, presence of Gann anniversary period and comeback of BankNifty in Friday’s trade indicates case of a strong upside move towards 11,350.
What could traders do: Daily ratio chart of BankNifty versus Nifty shows a reversal from point of polarity zone around 2.5. The same coincides 50 per cent retracement of the previous upmove from September 2018 to July 2019, which suggests possible outperformance from banking stocks from hereon.
TECHNICAL AND DERIVATIVES ANALYST, KARVY STOCK BROKING
Where we are: Nifty is currently hovering around the psychological mark of 11,000 as tough war is witnessed between the bulls and bears from last couple of weeks. In the broader market we may see stock specific action spread across the various sectors taking cues from the domestic and global news flows. The next crucial supports placed near 10,900-10,920 zones below which it may drift towards 10,800 levels. The index may witness fresh round of short covering rally if it closes well above 11,120-11,150 levels.
What is in store: We expect Nifty to remain highly vulnerable to the global and domestic developments coupled with the ongoing weakness in the rupee and rebound in crude oil prices. As per the options data of the weekly options expiry, Nifty is having maximum call writing at 11100CE followed by 11200CE while on the flip side 10900PE is having the maximum open interest followed by heavy build up in 10800PE indicating the next crucial support. The overall technical set up suggests that the broader market conditions may remain volatile with wild move expected on either side.
What could traders do: At current juncture, the volatility has narrowed to 15 per cent as depicted by India Vix index with Nifty flirting with its short-term moving average. It is advisable to avoid any directional call in Nifty till clear trend emerges on technical parameters. Meanwhile short-term traders may put their long bet in counters like Siemens, Divi’s Lab, Nestle and Avenue Supermarts which has witnessed pattern breakouts followed by Bajaj Auto and Larsen & Toubro which has added long addition in the derivative space.