By Anand James
The run up to 21k was not breathtaking, but not uninteresting either, having thwarted multiple attempts by bears and recovering in miraculous fashion, which is classic to bull runs which defies all doubters. However, buyers were seen withdrawing post testing this psychological mark. This leads us to suspect that bears have regrouped enough to make a serious dent on the 19,850/800 region, and should it give away, a quick drop to 20,640/560 would be the first outcome. Additionally, weekly RSI which has been running overbought signs for a while now, has also signalled a negative divergence.
We had doubted the possibility of Bank Nifty outperforming Nifty placing our bets on the latter better placed to find new leaders. Incidentally Bank Nifty defied those surmises spectacularly, far exceeding the optimistic upside objectives that we had lined up for last week. The clean breakaway rallies accompanied with continuation patterns encourage us to look for extension in uptrend aiming 47,800-48,200. While patterns favour upsides, oscillators are clearly screaming overbought, at the top of their voices. But this is a classic case of bullish phases, but the fact that negative divergences are visible in weekly and monthly time frames clearly signals volatility ahead, and cautious against fresh positions, but to let profits run. On the flipside, 47020 may be used as a downside marker, with 46,507, the reaction low, seen as the most adjacent support.
Sensex meanwhile is well poised to take down the 70k mark, but sustainability is doubted. Towards this end, we prefer to place our downside marker for the uptrend at 69,700, with further support seen at last week’s reaction low of 69,320 and near the congestion point of 69,190. With USDINR, bargain hunting persisted through the week, though the will to burst past 83.4 was found missing. We continue to wait for a breach of the same to play a rise towards 83.65, but brace for steeper dip, should 83.19 give away.
(Anand James, Chief Market Strategist at Geojit Financial Services. Views expressed are author’s own. Please consult your financial advisor before investing.)
