Nifty This Week: Technical Charts And More – Notice What The Market Didn’t Do

Being long in the market last week helped, as the benchmark index did move higher and fared reasonably. It was not all smooth sailing as intra-week volatility was visible. But bite was missing in the selling and sentiment repair was evident from the fact that the market made an attempt to move higher every chance it got, and breadth too was fairly broad-based. Undoubtedly, the ride was a bit of a roller coaster but since the news flow was not as scary it was in the earlier weeks the market made quick comebacks from dips. The first chart, as usual, shows the pathway through the week..Where does that kind of move leave us? The answer is, nowhere. The meandering of last week means that the odds of the week earlier remain more or less the same. The wide gap up of March 17 remains open with minor dips into that region (quickly rebuffed). The weekly candle though is small ranged and signals a halt to the two robust weekly candles we got recently. Again, that is neither here nor there.Was it the continued war situation or maybe oil moving back up or maybe March-ending stuff? No real idea why the market ranged the way it did. Maybe it had to do with U.S. inflation being on a bit of a tear? I would rather take solace from the fact that despite all these factors being present, the market chose not to surrender. In my book, many times it is what the market doesn’t do that is equally important as what it does. Here the market had a chance to give back what it had accumulated in the last two weeks. Plenty reasons were available. War and oil did the trends in just a couple of weeks ago and both concerns are still present. U.S. Fed-speak was a bit ominous, with 50 basis point hikes being spoken about in plural. No specific local news to embolden the bulls. Yet, the bears didn’t charge.Reminds me of the old Sherlock Holmes short story, The Adventure of Silver Blaze. Could bears not growling when they had a chance be the equivalent of the dog in the horse stable that didn’t bark? Here is to some more absent barking from the horse race on Dalal Street....The Nifty rallied briskly to the level of 62% retracement of the October-2021-to-March-2022 fall. In the circumstances described above, that move ought to have been good enough to push prices lower..The second chart shows that set-up..It was not just the Nifty 50. The Bank Nifty too rallied almost till the 62% level. Even though a very large bulk deal occurred in Kotak Mahindra Bank Ltd. while HDFC Bank Ltd. keeps seeing multiple big blocks being transacted frequently—the bank index still managed to sustain itself some. There was also news flow stating that banks and financials have been the main selling items by foreign institutional investors and even that didn’t dent sentiment much.Lending helping hands were Reliance Industries Ltd. and ITC Ltd., both with good weight on the Nifty. The energy index was shored up nicely by some improvements in RIL. Sentiment always improves when metals are on the move and that happened in a chunk last week as metal stocks were in good form and gave plenty of opportunities for traders to be active in the market. Had we seen some more robust action in the midcap and small-cap indices, one could have been a little more sanguine about the trends but they were a bit mixed. There is nothing like rising values in one’s portfolio to perk up the adventure spirit among traders and active investors. ITC ran a solo race in the FMCG space though and could not salvage the trends for that sector because several others from there caved in, kind of nullifying the contributions by this hitherto somnolent stock.While on ITC, the near-vertical move cannot go unremarked. See the next chart. It is one of the largest bullish candles on the monthly chart (with another week to go for the month) accompanied by large volumes. That certainly is a departure from the normal and presages more gains into the future. Perhaps the up move that so many in the market are waiting for in ITC is finally about to manifest?.The only occasion when I found a larger range price bar on ITC was in July 2018 but I feel that too may get bested within this month. Such large price shifts are often a signal of a long-term change in trends..Interestingly, there was also a sharp decline in the open interest in the futures for the stock. When you place that in the context of the price action, it seems evident that long-term shorts or even arbitrage shorts have been wound up in the counter. The fourth chart shows this setup. Note how the delivery volumes in the stock have been going up too..Returning to the Nifty, the week ahead doesn’t really have any fresh triggers to make any forecasts. So I am falling back upon some esoteric methods of WD Gann which tell me that the current rise has room up to 17,520 in price. I would want to keep playing the dips with a buy trade whenever prices hit some localised supports and show a reversal. Last week I had written that we can remain long with a stop at 16,500. Prices have moved along some but not much. Hence the stop may have to stay in that zone yet. The gap zones at the 16,800-17,000 area would provide the first of the dip-buy area in the week ahead..CK Narayan is an expert in technical analysis; founder of Growth Avenues, Chartadvise, and NeoTrader; and chief investment officer of Plus Delta Portfolios..The views expressed here are those of the author, and do not necessarily represent the views of BloombergQuint or its editorial team.

Nifty This Week: Technical Charts And More – Notice What The Market Didn’t Do

The gap zones at the 16,800-17,000 area would provide the first of the dip-buy area in the week ahead, writes CK Narayan.

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