It was a truncated day for the markets; over the past four trading sessions, the Indian equities continued to edge higher and ended on a fresh lifetime high. The volatility too remained at elevated levels.
As mentioned in the previous technical writing, the markets are building up ahead of the General Election results on June 4th; this is one of the major external events that affect the markets.
Post Market Weekly Analysis
The Nifty 50 weekly Index opened at 22404.55 touched the high level of 23026.40 and slipped down to 22404.55 before closing at 22957.10. So the benchmark index oscillated in a range of 621.85 points over the previous week's trading sessions, finally closing on a gain of 491 points, i.e. in percentage term (2.19%) on a week-on-week basis.
Nifty 50 Index Monthly Chart
Continous upwrd journy on monthly chart is still strong from previous 6 months. The volume and all Simple moving averages are in confirtable zone, which speaks loud that the index is still bullish and can touch more heights. The monthly index will only weak below 21800 only, 22400 level is watchful for trend reversal confirmation.
Nifty 50 Index Weekly Chart
The weekly chart is getting support from 9 Week SMA, with strong volumes. This will start weaking only below 22450. Upside cn not gauged becase, the index is in unchartered territory. After crossing 23000, the index can touch 23350 immediately.
Nifty 50 Index Daily Chart
The last trading session saw the rejection from life time high, but it is still in the strong bullish zone. 22546 is the strong support, which should not break. Below this level only , the index will become weak. Sustaining above 23000, will welcome short covering, hich can take the index up to 22350 levels.
Nifty 50 Weekly Fibonacci Chart Status
The weekly Fibbonaci chart suggest, that if sustain above level 1 i.e. the level of 23059, then we can see the upside upto level 1.272, which stands on 23197, and followed by 23967, which is 1.618 levels.
Nifty 50 Index Weekly Chart -with Technical Indicators
RSI Indicator Pattern
The weekly RSI is 67.26; it shows a mild bearish divergence against the price
Money Flow Indicator
This weekly indicator is at 66.65 which suggests neutral signals.
MACD Indicator Pattern with Bollinger Band
The weekly MACD is bearish and trades below its signal line. A strong whitebodied candle shows a buoyant trend that existed throughout the week.
FII's & DIIs Cash Weekly/Monthly Activities
Foreign institutional investors (FIIs) significantly lowered their selling streak amid robust domestic market sentiments. Though FIIs were sellers for three out of four sessions last week, yet a net inflow was recorded at ₹1,165.54 crore. Domestic institutional investors (DIIs) were net buyers for all sessions, with a total investment of ₹6,977.71 crore, according to stock exchange data.
The massive short-covering caused by this sudden change in FII trade contributed to a sharp rally in markets. The change in FII stance has been caused by the underperformance of the Hang Seng index which is down 4.1 per cent during the last five days.
Foreign portfolio investors (FPIs) remained assertive sellers but also toned down their bearish sentiments last week. FPIs offloaded ₹22,046 crore worth of Indian equities and the total outflow stands at ₹17,848 crore as of May 24, taking into account debt, hybrid, debt-VRR, and equities. The total debt inflows stand at ₹2,009 crore so far this month.
"The long-term outlook for FPI flows into Indian debt is positive due to India's inclusion in global bond indices. However, near-term flows are being impacted by global macroeconomic uncertainty and volatility. The trend will reverse once the interest rate outlook becomes clearer.
‘’The RBI's dividend payout is a positive development for the fiscal situation. However, its impact on FPI interest in the debt market is uncertain and will depend on how the government utilises the dividend. Considering the overall economic conditions, clarity on this matter will emerge in the full budget in July 2024, providing a clearer picture for FPI investors.
Outlook for the NIFTY 50 Index for the Coming Week
The pattern analysis of the weekly chart continues to show Nifty staying in a small rising channel; however, the nearest support in the form of a 20-week MA exists way below at 22179. So the slightest of the corrective bout has got signicant downsides from the current levels. The 50-DMA is placed at 22342. So on a broader note, the immediate support zone for the Index exists at 22150-22350 levels. While the markets may stay in a broad range so long as they are above this zone, any violation of this support zone with inict technical damage on the charts.
India VIX:
The previous week had seen VIX spiking up by 11.11%. This week as well, over the past week's sessions, the VIX has surged another 5.77% to 21.71
Support Level for the Coming Week for NIFTY:
The broader support level on the technical chart could be 22700, followed by 22550 levels.
Resistance Level for the Coming Week for NIFTY:
The broader resistance level on the technical chart could be the level of 23200, followed by 23350 levels.
Important Upcoming Monthly/Weekly Activities
Global Cues
The Dow Jones and S&P 500 both ended their multi-week winning streaks. The unexpected strength in the economy has prompted many to push back their expectations for US Federal Reserve rate cuts, creating caution in interest rate-sensitive sectors.
Nasdaq is set to extend its winning streak, buoyed by Nvidia’s standout performance. Nvidia’s earnings report was a major highlight, with shares surging 9.3 per cent, reflecting strong investor confidence in the company’s future prospects.
The US monthly inflation indicator, ‘personal consumption expenditures’ (PCE) index will be released on Wednesday and the Eurozone consumer price index (CPI) data will come out on Friday, May 31. Traders and analysts will keenly watch out for signs of inflationary trends that might influence monetary policy decisions.
The Federal Reserve has indicated a willingness to hike rates further if necessary, reducing the probability of a rate cut in the near term. The PCE data will be essential in determining the Fed's monetary policy direction.
Also, a 25 basis points rate cut by the European Central Bank (ECB) is almost fully priced in for June, contingent on no inflationary surprises. The upcoming CPI report will be pivotal in shaping market sentiment and ECB's next moves.
Globally, trends are mixed: The Dow Jones Industrial Average (DJIA) has sharply retreated from its record high, while the tech-heavy Nasdaq and the broader S&P 500 are still showing resilience and inching higher
US bond yield movement and commodity prices including crude oil, gold, and silver are the other factors will be closely monitored, as they will influence market sentiment. Upcoming economic data releases from Japan and the US, along with movements in the global currency market, will also be important factors to consider.
The continuous decline in crude oil prices, which have fallen nearly 12 per cent from their recent swing high, has raised expectations of a reduction in US inflation figures. This potential mitigation of inflation could prompt US monetary authorities to lower the key benchmark rate sooner than anticipated.
Crude Oil
International crude oil prices logged its longest weekly losing streak in five months after hawkish US Federal Reserve policy stance raised fuel demand worries among investors. In the previous session, the Brent crude July contract rose 76 cents to $82.12 per barrel. The more-active August contract closed 73 cents higher at $81.84. Also, US West Texas Intermediate (WTI) crude futures settled 85 cents, or 1.1 per cent, higher to $77.72.
On Thursday, Brent settled at its lowest since February 7 and US WTI futures at their lowest since February 23. The Brent crude benchmark closed down 2.1 per cent for the week. Crude oil prices declined for four straight sessions last week, recording its longest losing streak since January 2. WTI settled down 2.8 per cent for the week.
The oil market is awaiting the online meeting of the Organization of the Petroleum Exporting Countries and its allies (OPEC+) on June 2, to decide whether to extend voluntary oil output cuts of 2.2 million barrels per day. Commodity analysts largely anticipate that current production cuts will be extended at least to the end of September amid the decline in crude prices.
Technical Analysis
The market's buoyancy over the last two weeks has countered the previous bearish sentiment, and we expect the Nifty to move toward the 23,150-23,400 range soon. In the event of a dip, the 22,550-22,800 zone is expected to provide strong support.
’While all key sectors are contributing to the rally, banking and IT still have significant upside potential, and their participation could drive the index to much higher levels.
We recommend continuing a stock-specific trading approach, with a preference for large-cap and large mid-cap stocks for short-term trades.
The structure is now bullish with a buy-on-dip approach, where 22,780 is the first support and 22,500 is the next support level. Following the breakout, there has been a notable increase in positive momentum.
The formation of a long bullish candle on the weekly charts, along with breakout patterns observed on both daily and weekly charts, indicates a continued upward trend from the current level.
Reading Current Option Data
Options data indicated that 24,000 is expected to be the key resistance area for the Nifty 50 in the coming week, with key support at 23,000 levels.
On the weekly options front, the maximum Call open interest was seen at 23,500 strikes, followed by 23000 and 22,850 strikes, with maximum Call writing at 23,000 strikes, then 23,500 and 24,000 strikes. On the Put side, the 23,000 strikes saw the maximum open interest, followed by 22,800 and 22,700 strikes, with the maximum writing at 23000 strikes, then 227,00 and 22,500 strikes.
Participant Wise Final F&O Weekly Summary
FII's, PRO, and Clients F&O Summary by Segment
1). FII's positions as of the last trading day:
2). PRO's position as of the last trading day:
3). CLIENT's position as of the last trading day:
Summary - Overall
Overall, as we navigate the coming monthly derivatives expiry week and the general election outcome after that, it would be extremely important to prepare for the volatility that we are set to witness in the markets.
It would be prudent to curtail leveraged exposures. Fresh buying should be kept limited to defensive and low-beta stocks; exposures in stocks with either strong or improving relative strength would be an added advantage.
While enforcing strict protective stops and opting for hedges wherever possible, a very cautious approach is advised in the coming week.
Thanks for reading.
Keep Trading
Stay Invested
Regards,
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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