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Nifty - Is Another Lifetime High 22185 on the cards? Only Short the market when it gives a weakening signal

In the near term, investors' trade positions will be more inclined toward the upcoming result season; the overall forecast for earnings growth remains optimistic, projecting double-digit figures.

On the global front macroeconomic data from the USA and China, along with movements in the dollar index, US bond yields, and crude oil prices, would be closely monitored. Geopolitical tensions worldwide continue to be a source of uncertainty, demanding the market's vigilant attention

Post Market Weekly Analysis

The Nifty 50 weekly Index opened at 21747.60 touched the high level of 21928.25 and slipped down to 21448.65 before closing at 21894.55. So the benchmark index oscillated in a range of 479.60 points over the previous week's trading sessions, finally closing with a loss of 183.75 points, i.e. in percentage term (+0.85%) on a week-on-week basis.

Nifty 50 Index Monthly Chart

the monthly chart has already gone up by 163 points, even if the FPIs are in selling mode. The volumes are quite high and it is comfortably sitting above the previous month's highest point. No doubt, it can go further up, because the euphoria is so strong, that retail and DIIs both are on a purchasing spree.

Nifty 50 Index Weekly Chart

Rejection from the low level and buying momentum is visible in candles. in the previous week's chart pattern. For the week, the index has seen bullish candlestick formation with long lower shadows and continued higher highs for seven weeks in a row. This formation completed its journey after the previous week's dozi candle, ending the confusion so far.

Nifty 50 Index Daily Chart

Friday ends up with a strong note, opening the gap up and sustained, this shows that the undercurrent is bullish. It seems we can make one more lifetime high before taking a halt or taking a rest for consolidation or correction.

Nifty 50 Weekly Fibonacci Chart Status

The level of the Fibonacci series is comfortably increasing and moving towards 22200. As per chart till 22750, there is no resistance, because the index is in unchartered territory, but we know that the index has already one-way rally from 18836 without any meaningful correction, so we can say that, there would be consolidation or correction overdue.

Nifty 50 Index Weekly Chart -with Technical Indicators

RSI Indicator Pattern

The weekly RSI stands at 77.13; it remains mildly overbought. The RSI has also formed a new 14-period high but stays neutral without showing any divergence against the price

MoneyFlow Indicator

This weekly indicator is at 89.23, which seems in the overbought zone or a very limited upside. And it can be considered on the higher side, which gives the signal of consolidation or correction ahead.

MACD Indicator Pattern

The weekly MACD is bullish and remains above its signal line.

FII's & DIIs Cash Monthly Activities

After the relentless buying in December month, foreign portfolio investors took the slow lane on Dalal Street in January, even though markets hit record highs.

Data showed that foreign portfolio investors turned net sellers of equities in the last week after being net buyers in the secondary market in the preceding week.

FPIs net sold Indian equities worth Rs 2,477 crore in the secondary market last week, according to data on Stockedge. They had net bought shares worth Rs 4,436.05 crore in the week ended January 5.

Despite selling by the big bulls, benchmark Nifty 50 clocked weekly gains of around 1% and also scaled a lifetime high of 21928.25 points on Friday.

Notwithstanding the slowdown in inflows this month, market experts see the overall trajectory of inflows remaining positive. Since 2024 is expected to witness further declines in US interest rates, FPIs are likely to increase their purchases in 2024 too, particularly in the early months in the run-up to the general elections

Previous Week's FII positions in Options & futures and Cash Segment

FIIs have net sold Rs 3,900 crore worth of shares in the week ended January 12 and for the current month, their net selling was a little more than Rs 600 crore in the cash segment. The US 10-year treasury yields climbed over the 4.00 percent mark during the week, before ending at 3.94 percent on Friday.

Domestic institutional investors were also net sellers for the month to the tune of Rs 438 crore, but for the passing week, they made strong buying of Rs 6,858 crore in the cash segment helping the market to hit a new high.

Outlook for the NIFTY 50 Index for the Coming Week

On coming Monday, the market will first react to Wipro and HCL Technologies numbers as well as monthly inflation and industrial production data released on Friday after market hours.

Given the optimism at Dalal Street, in the coming week, the market may climb further higher to 22,000-22,100 levels on the Nifty 50, but intermittent consolidation can't be ruled out, with focus majorly on corporate earnings with heavyweights announcing numbers that will bring in stock-specific action and China's GDP for Q4CY23 & Europe inflation on the global front.

A candle with a long lower shadow has emerged. The prior candle to this was a spinning top or a Doji. Such candles after a sustained upmove continue to hold the potential of stalling the trend at any point in time. However, in the same breadth, candles are never traded in isolation and one must always look out for confirmation


India VIX:

The previous week India VIX closed at 13.10 from 12.63 Within five trading sessions, it touched a high of 14.55 and a low level of 12.42, It gained on a closing basis by

+.4700 (3.72%) on a week-on-week basis.

The volatility increased during the last week after a sharp decline in the previous week, but still far below December's high of 16.47 levels. The fear index, India VIX was up by 3.72 percent to 13.10 during the week ended January 12, after a 12.91 percent fall in the previous week.

Support Level for the Coming Week for NIFTY:

The broader support level on the technical chart could be in the range of 21745 followed by 21580 levels.

Resistance Level for the Coming Week for NIFTY:

The broader resistance level on the technical chart could be 21950, followed by 22185 levels.

Crude Oil

With the further escalation of tensions in the Red Sea area after airstrikes by the US & UK in the Houthi-controlled areas of Yemen, all focus will be on oil prices. Brent crude futures crossed the $80 a barrel intraday last Friday and settled down at $78.29 a barrel but still up from the week's low of $75.26. Experts feel the geopolitical tensions will keep supporting the oil prices.

Concerns about a broader conflict in the Middle East and potential direct involvement by Iran posed threats to output and flows in a region responsible for a third of the world's crude production.

We feel crude oil prices may remain supported amid fears of disruptions and the need for vessels to divert, especially as Saudi Arabia warned that recent actions by the US and its allies could inflame tensions.

Important Upcoming Weekly Activities

Domestic Economic Data

On the economic data front, India's monthly wholesale inflation, as measured by the Wholesale Price Index, for December will be released on January 15. We expect the WPI inflation to increase further, against it was at 0.26 percent for November, the highest print in eight months.

Passenger vehicle sales and balance of trade data for December will also be announced on the same date, while foreign exchange reserves will be released on January 19.

Global Economic Data

On the global front, the market participants will keep an eye on China's quarterly GDP and industrial capacity utilization numbers for Q4-CY23 will be released on January 17. China's economy grew 4.9 percent year-on-year in the July-September period in 2023 against 6.3 percent in the previous quarter.

Apart from that, the focus will also be on US jobs data, Europe's December inflation numbers, and retail sales for December in the US & China, while the participants will also take cues from the speech by ECB President Lagarde.

Red Sea Tension

Further, the global investors will also closely watch the geopolitical tensions with the Red Sea in action. The United States and the United Kingdom launched several air strikes on Iran-allied Houthi militants in Yemen on January 11 in response to attacks by Houthi rebels on Red Sea shipping, escalating more tensions in the Middle East that started since the Israel-Hamas war in October last year.

After the airstrikes by the US and UK, several of the world’s major tanker companies, including Hafnia, Torm, and Stena Bulk, on January 12 halted traffic toward the Red Sea, the crucial trade gateway in response to an advisory from the Combined Maritime Forces, a multinational coalition led by the US.

Technical Analysis

The Nifty 50 finally has seen a breakout of a downward sloping resistance trendline at 21,750, triggering a new high of 21,928, with continuing higher highs, and higher lows for the second consecutive session. For the week, the index has seen bullish candlestick formation with long lower shadows and continued higher highs for seven weeks in a row.

Hence, technically we expect the Nifty 50 to march towards the 22,000-22,100 area before getting into consolidation mode.

Nifty successfully breached the 21,800 resistance level, with 22,000 acting as a psychological hurdle and 22,220 identified as the next target level. On the downside, the 21,750–21,650 range constitutes the immediate demand zone, with 21,500 serving as a key support level

From a technical standpoint, the markets are once again at a crucial juncture. The Options data suggest that the markets may have opened up some more room for themselves on the upside.

However, the overall structure of the charts also suggests that the Index is highly overextended and continues to remain prone and vulnerable to profit-taking bouts from current levels.

With the ongoing trend staying strong, the only method to approach such markets is to keep trading following the trend while effectively trailing the stop-losses higher. Volatility also inched higher

Reading Current Option Data

On the weekly options front, the maximum Call open interest was seen at 22,500 strikes, followed by 22,300 & 21,900 strikes, with meaningful Call writing at 22,600 strikes, then 22,500 and 22,700 strikes.

On the Put side, the 21,700 strikes owned the maximum open interest, followed by 21,000 & 21,800 strikes, with writing at 21,700 strikes, then 21,800 & 21,000 strikes.

The above options data indicated that 21,800-21,700 is expected to be immediate support for the Nifty 50, with an immediate hurdle on the higher side at 22,000.

The option activity at the 22,000 strike will provide cues about Nifty’s intraday direction on Monday.

The resistance for Nifty shifts to the 22,500 level from the 21,800 level after Friday’s close

Participant Wise Final F&O Weekly Summary

FII's, PRO, and Clients F&O Summary by Segment

FII's positions as of the last trading day:

PRO's positions as of the last trading day:

CLIENT's position as of the last trading day:

Summary - Overall

The technical analysis on the weekly charts shows that the Nifty continues to extend its breakout. The index had broken out from a rising channel when it crossed above 20800 levels. This breakout continues to take the markets higher; however, at the same time, the Nifty remains heavily overextended on charts.

The nearest technical support stands at 21000, the 20-week Moving Average is 1679 points below from current levels at 20215. The 50-week Moving Average is at 19112; at least 2792 points from the current levels. With the nearest pattern supports standing at almost 900 points from the current levels, any mean reverting moves shall be significant to their extent.

So Overall, the method to approach the markets from now on is pretty much classical. There is no question of shorting the markets or going against the trend. However, given the over-extended nature of the markets, it is of paramount importance that one keeps trailing their stop losses effectively in the manner that the major portion of the profits stands protected.

New purchases must be kept defensive; it is expected that sectors like FMCG, Pharma, etc., may do well going ahead from here. While keeping leveraged exposures under control, a highly selective approach is advised for the day

Thanks for reading.

Keep Trading

Stay Invested


Neeraj Bhatia

(Managing Director)    

Disclaimer: I am a National Stock Exchange-certified Technical Analyst and Chartist but not a SEBI-registered analyst, so consult your financial advisor before taking any trade. This technical weekly post-market journal is only for learning purposes and it is downloadable free of cost. The views written here are entirely only my personal views. I am not forcing anyone to follow my thoughts. I do not have any WhatsApp Group ID or Telegram ID related to it.

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