11,800-11,750 are likely to act as an immediate floor for Nifty50.
Nifty's struggle around the 12,000 mark was yet again at display in this week's trade. The 12,000 hurdle is proving to be a sticky bottleneck for bulls, and the non-trending phase or time-wise correction continues to make life difficult for index traders.
Presence of a large bearish bar around 12,000 in place since last week of February 2020, has resulted in sharp reversal moves in the last few sessions. This week, post-Wednesday's intra-day fall from the cursed zone of 12,000, Nifty quickly rebounded, failing to endure below the peak of Tall Red Bar (of August 31). Strength of banks & financials also fueled the recovery.
During the weakening, index filled its upward gap formed on Monday, however, a swift recovery from the gap area implies renewed buying interest during the intraday decline. A decisive move above the cluster of supply zone i.e. multiple peaks around 12,000 and three-digit Gann number of 12,100, is essential to regain momentum on the upside. While, on the flip side, the zone of 11,800-11,750 is likely to act as an immediate floor.
Despite a mellow performance by Bank Nifty in the last two sessions, it rallied by around 4 percent in the week and is now whiskers away from August 2020 high. Standalone point & figure (P&F) chart of Bank Nifty shows a 100 percent bullish pole, bullish double top buy and an anchor column which highlights the recent strength. P&F Ratio chart of Bank Nifty/Nifty shows a bullish breakout from triangle pattern followed by anchor column, with vertical count activate till 2.09 mark, implying continuation in the outperformance of banks.
Nifty Metal index rallied by around 5 percent & Nifty Realty index notched up gains of over 9 percent this week as focus shifted to left-out sectors which had not participated in the recent run-up. During recent decline, the ratio of Nifty Metal index/Nifty managed to defend July month's bottom and a pullback move was seen. Positive follow-through resulted in buying interest within the Metal space. The ratio has bounced off from the support of its rising trendline on the weekly chart in place since April 2020, implying outperformance of metal stocks.
Momentum was also seen in broader indices with Nifty Midcap 100 index rallying by 3 percent. On the standalone chart, it has staged a breakout above a downward sloping trendline. Breadth in Nifty Midcap 100 index rallied to 54 percent (as of Thursday's EOD) from 15 percent in last one week (i.e. 54 percent of Midcap constituents are trading above 50-DMA), implying action in midcaps as price structure and breadth both are improving.
Meanwhile, the ratio of Nifty Pharma/Nifty index had staged a sharp rally in 2020. However, since May 2020, broader ratio chart has been consolidating with multiple peaks acting as a hurdle. Currently, a corrective move is seen on the ratio, which implies near-term underperformance and possible pullback to 0.92 in the ratio.
(Pritesh Mehta, Lead Technical Analyst - Institutional Equities at YES Securities.)Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.