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Nifty - Near All-Time High; Is undercurrent strong?

Updated: Jun 18, 2023


This week, we reached just near the all-time high level, but could not able to touch it, and we left this task to be completed in the coming week.


Do you know why? The reason is very simple, we are moving toward the Nifty 50 Index's all-time high without any enthusiasm. We have technical diversions in other indices, along with we have weak support from the bank Nifty index and Low India VIX.


Overall in the previous week, the Nifty 50 Index oscillated in a 304.95 point range. The NIFTY has ended the week with a net gain of 262.60 points (+1.41%) on a weekly basis.


In the coming week, we may see the benchmark index kissing or crossing the previous high point of 18887.60; but, we need to consider, is it the same long-awaited breakout we are looking for. Because we can feel the missing breadth in overall Nifty indices.


We will discuss all details, let us start discussing what indications we are getting from our technical charts:


Nifty 50 Index Monthly Chart

So far monthly chart is clear that it is going to prepare a third green candle above the previous month's closing level. It is a comfortable riding upward journey within the channel. It is proving the proverb that slow and steady wins the race.


Nifty 50 Weekly Chart (Fibonacci Chart Status)

We suggested that the sustainability above the 18600 level on the benchmark index can touch an all-time high and also can go beyond, which will force the Fibonacci series to reach its highest level which is 100% of its benchmark.


As we can see, from the chart, it has almost touched it. In the next week, it seems, it is going to cross its highest level and started moving upwards to its new extension level if the Nifty 50 index successfully gets crossed the 18886.45 level easily.


Nifty 50 Index Weekly Chart

All the moving averages are supporting the Nifty 50 Index weekly chart. This week it can cross an all-time high level which is at 18887.60. Now beyond an all-time high, there is no resistance, it is an open sky for the Nifty 50 index. We need to see, how it will behave at the 19000 level. Does it show the strength in overall breadth?


Nifty 50 Index Daily Chart

The Nifty 50 Index Daily chart is also reaching just near the all-time high level, but the million dollar question is that "Is the undercurrent strong?


The Bank Nifty Index is at the same time underperforming. Maximum other indices are also not performing well.


Have a look at the below Advance Decline chart of other Nifty indices for references

FII's Daily activities in the previous week

As we can see, with the help of the above chart, FIIs are comfortably buying in the cash market, where DIIs are busy booking profits. Even DIIs have also started creating bearish positions in the derivative market, which shows that they are confident that above an all-time high, the journey is limited for the Nifty 50 Index.


While the benchmark index reached near all-time highs, many people started thinking of it as a potential breakout. But we need to think, is it really the strength of breakout, we are looking for?


The last day of the trading session on 16th Jun 2023 has seen an inflow of liquidity, because of FTSE and Senesex rebalancing. So it can not be said that we reached near ATH, with real enthusiasm. In short, we are riding with the weak market breadth and low India VIX, which can not give a comfort zone for an Investor.


As an investor, you need to look more deeply into the following data


As per Business Standard market news:


Nifty consensus earnings for FY23/24 have seen an earnings downgrade of 3.3 percent/1.4 percent since the late March 2022 peak.


Anyone can read the full article from the below link



The Nifty 50 Index Price Earning Ratio - (from 2014 onwards)

The Nifty 50 Index Price to Book Ratio - (from 2014 onwards)


Outlook for the NIFTY 50 Index for Coming Week starts from 19th Jun 2023


In the previous week, the Nifty 50 index closed above 18,800 levels which were acting as a stiff resistance earlier. So we expect the Nifty to continue with positive momentum during the next week as well.


On the weekly technical chart, the index has a formed bullish candle which also supports a further uptrend from the current levels.



India VIX


The previous week India VIX closed at 10.84 from 11.12. (Low from the previous week)


Support Level for the Coming Week for NIFTY:


Below 18720, the broader support level on the technical chart could be in the range of 18600-18550 followed by 18480



Resistance Level for the Coming Week for NIFTY:


Aboe 18720, the broader resistance level on the technical chart could be 18980 followed by the range of 19000-19230.


Overall, we should be more cautious at the all-time high level, because there are two views working simultaneously.

  1. Shorting the Index at an all-time high (Bearish)

  2. Fear of missing out, so buy on tips (Bullish)

We are suggesting, to protect your profit, by booking partial profits at this level and not falling prey to buying without a second thought.


Be extremely selective in choosing your stocks for all new purchases.


Don't use leverage given by brokers, till there is no directional bias is clear.


How do you know that the bias is directional now:

  1. The nifty 50 Index should be synced with BankNifty Index and Nifty Financial Services Index

  2. The Nifty 50 Index should be synced with all other Nifty Indices (explained above)

  3. Keep an eye on Low India VIX. Low VIX will give benefit buyers (either side) but also forced them to book the profit on their profitable trades (again either side)


Thanks for reading.

Keep Trading

Stay Invested


Regards,


Neeraj Bhatia

(Managing Director)

https://www.crbpvl.com/


Disclaimer: I am not a SEBI Registered technical Analyst, so consult your financial advisor, before taking any trade. This technical weekly post is only for learning purposes and its a free of charge. The views written here are completely my personal view only. I am not suggesting here anyone to follow my views. I do not have any WhatsApp Group ID or Telegram ID related to it.





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