Nifty In Technical Charts: New High Cheer

New highs were hit in the week just concluded. Yawn. At the very least, readers of this column should not have been surprised! But in the market, there were plenty who were nervous, very nervous. So, when there was a rally at the start of the week, people were like, ok, 50% retracement of the fall, no big deal yet. And then when the market slid on Wednesday, there were many going OMG, a fall, my stocks have lost money, is it over... Thursday didn’t repair matters until, suddenly, aggressive short covering in options completely turned the tables on the call sellers. Note, there was absolutely no news flow to ‘justify’ that yank in prices and that made it worse. Here is how it flowed across the week. Chart 1..When there is some news, people are at least able to put price moves in some sort of perspective. But when substantial move happens without any ascribable reasons, people are clueless in their framing of possibilities. See, whether you are an analyst or expert or just been at it for a while, you are framing the price action all the time, mostly subconsciously. People call it being ‘technical’ but it is not, really. It is just a human thing — trying to find some rationality in seeming chaos that is the market. For, in rationality we trust ourselves to act in our benefit. Hence this subliminal activity keeps happening without we even realising it! In terms of the framing activity, the chart shows that the prices have got framed by the Pitchfork channel rather nicely. Note that the new high was made right at the top pitchfork channel. Prices traded off those highs on Friday and going away for the week, the sentiment was a slight positive.When Thursday shellacking happened, it took call sellers to the cleaners. It was weekly expiry and therefore considered ‘payday’ by a lot of options traders. Those with bundles of money and a co-located server loaded with some trading algos hunt for cheap options to sell. Probabilistically, these bring home the bacon almost every week. But every now and then, the other side of probability kicks in and that is the day the sellers get cleaned out. .SEBI Closes Co-location Case Against NSE Without Further Action.Those with decent sized capital and some knowledge about how this game works, take it in stride. They know this happens every once in a while, and the important thing is to not get blown out of the water at such times. But that is not so for the common option trader (the non-professional ones). Thy get wiped out. Weeks’ worth of earnings gone in a single session.This is one reason why traders with very limited capital should NOT be playing in options. Understand that on the other side of your trade, in most cases, is a professional with experience and capital. It may also be an algo with a co-located server. You don’t stand a chance with either of these opponents. Understand that this whole game is won by making your opponent lose. When you know that the opponent is very strong, why would you even want to get into that game? Think about it. Anyway, getting back to chart 1 and the pitchfork catching the high, the road is a bit defined now. We can keep moving along, moving higher, with the prices staying largely between the top channel and the median line. That would be an ideal situation of continued bullishness. The median line is around 25,330 and rising while the lower channel is 25,200 and rising. These can be kept as working stops or buy-decline points for the trend ahead. Alternately, 24,900 area (the swing low of last week) can also be kept as a pullback buy area and a stoploss for swing traders. The stop for longer term players now elevates to 23,900-24,100 band. Readers will recall that this stop has been rising steadily from around 20,000 levels a few months ago and has reached 24,000 levels now. The weekly chart is shown in Chart 2..It shows that the rise from the June 23, 2023 low can be encapsulated in a nice gentle upward sloping pitchfork. This channel has been barely troubled by some reactions. Two momentum indicators are added for trend check, and it can be noted that the momentum signals are in continued good form all thru, till now. It is evident, therefore, that any of the nervousness in between has largely been in the minds of traders and some sceptical investors. The best course of action, even as of now, is to remain steadfastly long — something that I have been speaking of for many months now..Here's Why Fed Rate Cuts May Not Drive India's Equities Higher.In that context as well as the situation shown in chart 1, the fact that there was an emotional event that happened coincidentally. Do you recall the Reliance Power IPO that happened way back in 2008? It was subscribed most heavily, setting records back then and the date of listing was the top of the then bull market. Well, now you have the IPO of Bajaj Housing Finance Ltd. doing something similar — besting the collections of Reliance Power by yards, in terms of applications and total money garnered in the issue (some Rs 3.40 lakh crore!). Listing for trading is scheduled for this Monday, on Sept. 16. The expectations are that it may list at a hefty premium (100% I hear). Federal Reserve policymakers will meet on Sept. 18 to decide on a rate cut. Question here is, can history repeat itself? Will the combination of a high emotion IPO and a global event (US rate cut) prove to be a topping trigger?Nice to think of such events, but the probabilities seem pretty dim to me. I am again falling back on the by-now familiar items like continued liquidity (rising SIP numbers), strong economy (robust GST numbers, inflation under control, rising Forex reserves, intact GDP growth expectations, etc.), high positive sentiments (unwillingness to fall, quick recovery from minor pullbacks, etc.) and tolerance to seemingly high valuations of stocks and indices. I think those elements are still firmly in place and controlling the trend moves so far. But mentioning that fact here just so that readers may remember an important piece of history. Moving on, the Bank Nifty appears ready to join the fray. We had been looking for this earlier too but the index had refused to oblige. Now it seemingly is getting ready. Chart 3 shows the Bank Nifty in both Daily time frame (main chart) and the Weekly (as an inset)..India Better Placed Than Other EMs To Benefit From Fed Rate Cuts: Citi.The June 4 dip has definitely created a strong bottom after a nice rally to the top of a channel, prices retreated to the median line and is trying to stabilise there and attempting to inch higher. This attempt needs to be seen in the context of a super channelled move also seen in the weekly chart inset. More importantly, is the Trend oscillator in the weekly where the bulls (represented by the blue line) are in a commanding position over the longer term. Given this as a context, any revival of trends on the daily chart has to be seen as a fresh buy-dip signal. The main signal that we await is some good buying to reappear in the private banking space. The sentiments are still being governed by news out of the US. Hence, until the event of the rate cut is out of the way, the influence of US markets can linger. So that means, much of the next week as well. My turn date for this month is now Sept. 23-24, so I reckon we should survive the volatility of the US markets in the next week, if any. Portfolios may be seeing a revival too as evidenced by the Mid-Small400 index pushing to new highs as well. This can be seen in chart 4..The rise has been superbly trended, explaining how everyone has made money in this market. Notice now that the prices are moving away from the support trendline, which is suggestive of some trend acceleration. So, good times should continue to roll here and that should keep the sentiment cheer going. Summing up, the market is punching out fresh all-time new highs and that is always good news for the trend. Obviously, as trends accelerate, the safer buying points as well as stop-loss points will recede and perhaps become larger. But that is a price to pay as we seek yet new highs. Continue with the same buy-the-dip approach for the coming few weeks..US Fed Rate Action, India WPI, Bajaj Housing Finance Debut: The Week Ahead

Nifty In Technical Charts: New High Cheer

Market punching out new highs is always good news for the trend.

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