The Nifty has broken a bunch of records this week, propelled by a surge in sectors such as PSU, realty, and metals. It seems we may be somewhere in the middle of this leg of the bull run and there is still room for more upside from here.
Post Market Weekly Analysis
The Nifty 50 weekly Index opened at 19890, touched the high level of 20222.45, and slipped down to 19865.35 before closing at 20192.35. so the benchmark index oscillated in a range of 357.10 points over the previous five trading sessions, finally closing with a net profit of 372.40 points, i.e. in percentage term (1.88%) on a weekly basis.
Nifty 50 Index Monthly Chart
This month has been quite strong for the markets; the index has gained 938.55 points or 4.87% in this month so far. the Nifty monthly index has reached the top of our channel, which we have been following for a long period. But as we can see the benchmark index has reached unchartered territory, so we can not say, it will retrace from here or it will move forward to create again a new all-time high. We need to wait and watch for a directional confirmation.
A monthly positional bearish candle will form only when the index breaks down below the 19255.70 level. Ranged Consolidation can not be ruled out.
Nifty 50 Index Weekly Chart
All the SMAs are supporting the weekly chart, so far. As we know the benchmark index reached unchartered territory, so it can either touch the 20400 level first and then retrace to the 20070 level or it can retrace first up to the 20100 level, and then maintain the current bullish pattern till 20390.
For the positional traders, the index will be bearish only, if it starts trading below the 19865.35 level.
Nifty 50 Weekly Fibonacci Chart Status
Now, as the index touched its new all-time high, we need to make an upward shift of our Fibonacci chart forward, and now the new support has been shifted from 18800 to 19200 levels.
As per the new chart, the near resistance could be the 20265 level, and if it crosses above decisively, it can move upward to touch the 20400-20500 levels soon. the retracement or selling bout can break down the index to the 20100- 20050 levels.
Nifty 50 Index Daily Chart
Let us read the Nifty 50 Daily Index with other technical indicators. The last trading day volume was highest from its average highest volumes. The nearest breakout happened at the 19979.15 level on 11th September 2023. On 12th September, the day's low level touched 19914.65, so we can say that the retracement was completed, which could not able to break the previous day's low level, and then again the Index resumed its upward journey towards a new all-time high at the level of 20222.45
But there are some negative indicators that pop up on the surface, which should not be ignored :
RSI (Relative Strength Indicator) indicator, on a scale of 30-70, his reached its overbought zone. the current scale is visible at the level of 77.22%. Even if we upgrade the scale up to 30-80, the zone, still it is near its overbought levels only.
The money flow indicator on the Daily Chart has already reached its overbought zone, on a scale of 30-80, it has already crossed 88.67%
For positional traders, the Index will become, bearish on the daily chart, if it starts trading below the level of 20129.70, on a closing basis.
FII's Cash Monthly and Weekly Activities
The selling from Foreign institutional investors (FIIs) continued in the eighth consecutive week as they offloaded equities worth Rs 746.62 crore, while domestic institutional investors (DIIs) bought equities worth Rs 3,363.36 crore this week.
The Market continued the winning run through the third week in a row ended 15th September 2023, hitting record highs supported by positive macro data, continued buying from domestic investors, fall in selling by FIIs in anticipation of no rate hike by the Fed in the policy meeting next week.
Outlook for the NIFTY 50 Index for Coming Week starts from 18th September 2023
On daily and weekly charts, the Nifty has formed a breakout continuation formation which indicates that the uptrend wave is likely to continue in the near future.
Although the larger texture of the market is bullish, the market is in temporarily overbought conditions, and hence we could see some profit booking at higher levels, and the reason is low India VIX, which welcomes profit booking bouts in these conditions.
Besides firm global market cues, investors are anticipating a halt in rate hikes by the US Federal Reserve in next week's policy meeting amid moderating inflation, which would augur well for local markets already witnessing a strong upsurge.
A status quo on rate hikes would further bolster investors' sentiment as this would give a further leg up to the economy in hopes of softening interest rate stance going ahead
The previous week India VIX closed at 10.90 from 10.87 Within five trading sessions, it touched the high of 12.04, It gained on a closing basis by 1.14%.
For traders: India VIX once again leaves us at one of the lowest levels and once again exposes the markets to probable vulnerability and profit-taking bouts
Support Level for the Coming Week for NIFTY:
The broader support level on the technical chart could be in the range of 20000 followed by the level of 19820. levels.
Resistance Level for the Coming Week for NIFTY:
The broader resistance level on the technical chart could be 20250, followed by 20390, levels.
Reading Current Option Data:
Option data also indicated that the 20200-20500 levels are expected to be the resistance area for the Nifty 50 Index, with support at the 20000 level.
The maximum Call options open interest is seen at 20200 level option strikes, followed by the 20300 & 20500 level option strikes,
The maximum Put options open interest was at the 20100 level option strikes, followed by the 20000 & 20200 levels option strikes
The Option data suggests a shift in a higher trading range from the previous week, now between 19900 to 20400 zones while an immediate trading range between 20000 to 20300 zones
Technical View for the coming week:
The Nifty50 Index has formed a strong bullish candlestick pattern on the weekly charts and there seems to be a Three White Soldiers kind of pattern formation given the index rising for the third week in a row and closing at nearly 20200 levels.
The consolidation is expected to be on the cards after a recent rally, with support at 20000-19900 levels. Until these support levels get hold, we expect the index to face resistance at 20300-20400 amid the likely consolidation, and above the same, 20600-20700 is the likely scenario.
On the downside, we feel the 19700-19950 zone would act as a strong support in case of any dip. And, a decisive break above the 20300 level would help the index to gradually move towards 20700
Local and global Events to be considered
Best Suitable Trade for coming days - A Price-Action: Mean Revision Trade
Here’s one observation that can help take a low-risk entry into a bearish trade.
If we look at the past 10 trading sessions there’s one pattern that is clearly visible, i.e. the index has never breached its previous day’s low. In short, for the 10 consecutive sessions, the Nifty 50 Index has made higher lows.
Keeping this price action in mind, traders now need to wait for this pattern to break. Once the index goes below and is able to close its previous day’s low, traders can look for short opportunities with a stop loss of the high of that candle of a particular time frame, usually, we prefer the daily time frame.
This trade significantly reduces the risk as the distance between the previous day’s low and the high will likely be quite less, translating into a lower risk. Unless the previous session’s low is not breached just like the past 10 sessions, no bearish trade should be attempted as per the price action mentioned above.
Overall the low India VIX remains a concern once again and therefore, it would be prudent to avoid over-leveraged exposures.
Financial stocks are looking to take the lead, traditionally defensive pockets like IT, Pharma, FMCG/Consumption, etc. may attempt to relatively outperform the broader markets.
It is strongly recommended to continue to remain stock-specific in approach and also keep protecting profits at each higher level because India VIX continues to remain a concern.
This is advised not to short the market against the trend, it should be avoided till the direction is not clear but the protection of profits at higher levels is strongly advised over the coming week.
Thanks for reading.
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.