Nifty This Week In Technical Charts: Targets, Trends And Tripping Points

Did we get some clarity in the market last week? Not really. Three days we puttered about doing nothing much, and then the balance two sessions we pulled out with upside gaps.

What can one do with that data? Other than stating that the market retains its bullish bias, nothing more. But that is something I have been stating for the last few weeks.

The week ended well and so some cheer on the faces. Traders were a happy lot because the Bank Nifty did a lot better compared to the Nifty. This, too, was expected but since most traders are into Bank Nifty trading, it is a fact worth mentioning.

The swings in the Bank Nifty were steeper and so, it was probably a bit of an exhilarating ride for those who could manage to stay in the saddle all through.

Chart 1 shows the intra-week moves in the Nifty.

As expected, the Bank Nifty did better for the week, posting a gain of 2.52% compared to 1.68% for the Nifty. The question that pops up is will the Bank Nifty continue to outperform the Nifty in the coming week as well?

Chart 2 shows the BN/NF ratio chart and we can see a breakout above a pitchfork channel and that continues to suggest that the outperformance may persist.

The Bank Nifty crossed the 40,000-mark rather convincingly during the week, notching up 40,753 in the bargain.

While one may rejoice at that prospect, I also find—using some esoteric WD Gann methods—that a price target of 40,730 reached by Sept. 9 would provide for a good price-time match.

We have closed down a bit on Friday but for more gains, I would want to see the Bank Nifty move past 40,750 and hold above. Without that, I may want to consider the price-time confluence as being significant.

We can also calculate the lower level that should be held if the trend has to remain up and this comes to 39,927. I am moving my stop-loss in the Bank Nifty to this level and shall reverse to short side for trading plays with an expected downside target at 39,130 if this happens.

The next turn date that I shall watch in the Bank Nifty would be around Oct. 3. If the Bank Nifty continues higher, then I would expect it to continue till about 41,540 levels.

For the Nifty, we are yet to hit the projected highs and that comes to around 18,300. If this has to be achieved, then 17,770 should be lost. A break below the lower value would open up possibilities of decline up to 17,250 areas ahead.

It can be noted that the Nifty has room to go up from current levels compared to the Bank Nifty. So, maybe the Nifty stocks may get into overdrive here? I would certainly want to look for that as a signal that the Nifty rally can continue.

If that happens, the Bank Nifty could get dragged up to its next higher target too. The time count for Nifty extends till Sept. 13, so would watch for changes in trend (or extension of) beyond this date.

One of the surprise winners of the week ended was the IT sector that showed a 3.5% jump, with most of those gains accruing on Friday.

While this may be noteworthy, it will also be prudent to remember that there is much to do before IT stocks can regain their mojo.

Most names were oversold and, hence, a pop there was to be expected. Also, a whole lot of people were finding the levels in most IT stocks to be attractive and hence, the readiness to buy was there.

The sector will really require some news flow to emerge to carry through in the coming week. Hence, look before you leap would be the advice here.

Chart 3 shows the sudden new interest but, as can be noted, the moves are no real great shakes yet. A slight hint of a range shift, perhaps.

But more to be done, like I said before, for us to pay more attention. But pay attention we must, because we have heavyweights in this sector for the Nifty, and that can tilt the scales for the Nifty itself to perform ahead.

Another sentiment-influencing sector would be metals. The sector has been a bit subdued for the last couple of weeks but news trickling in now about China and Europe, particularly relating to aluminium, could see some interest return to the sector.

The daily chart of the Metal Index had been reacting a bit but has certainly not lost its momentum strength, as should be evident from chart 4, that shows the Metal Index.

One can note in the chart that the prices continue to hold above all the Ichimoku lines and the RSI chart, too, remains rather positive. So, one of the sectors to keep tab of next week may be metals.

There seems to be some sudden interest in cement counters. Perhaps, it has to do with the open offer for ACC Ltd. and Ambuja Cements Ltd. by the Adani Group.

The market grapevine says that holders may wait it out for better prices than what has been offered.

While the open offer price is in line with the current valuations of the two companies, it is possible that the market is into greedier mode.

We don’t have a cement index, so I have constructed a pseudo-index using top cement stock prices.

This can be seen in Chart 5 as a thick blue line. Overlaid on this ersatz index is ACC (light blue) and Ambuja (orange line) charts.

It can be noted that these two are clearly outperforming the other bunch of cement names.

Hence, the action is here and it seems that one should continue to keep an eye on Ambuja during market declines, if any, to play the cement sector.

And, how can we go without a mention about the biggest wealth builder of the last six months or so—stocks from the Adani Group.

While all stocks have been on a tear, I am showing three on this chart—Adani Enterprises Ltd., Adani Ports and Special Economic Zones Ltd., and Adani Transmission Ltd.—as these three are still in a strong rising mode.

Notice how Adani Ports (light blue) has picked up momentum of late and could still be the one to concentrate on in the week ahead.

Too high? Well, that’s what people thought about all the stocks from this group about three months ago. And see where they are now. Sometimes, it is all about the trends and the strength of it.

So, wrapping up, markets are still in good form with stocks supporting the drives higher.

Sector rotation is visible—which is typical in a bullish phase. Index important levels based on some Gann analysis is provided along with time counts.

Now, it is up to the readers to make the best of all this information.

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 BQ Prime or its editorial team.