Nifty50 has been consolidating in a narrow range of 14296 to 14617 for the last eight consecutive sessions. This is the fourth consecutive week of consolidation in the Nifty.
Markets have been directionless in the recent past. Indicators and oscillators have also been showing signs of consolidation till now.
However, looking at the short-term chart of BankNifty, it seems that banks could outperform in the days to come. BankNifty has confirmed the higher top and higher bottom formation on the daily chart, while Nifty is yet to form the same.
Oscillators also indicate the dominance of BankNifty over Nifty. BankNifty has surpassed the previous swing closing high of 32,112 on the daily chart.
The Nifty has formed a strong base around 14150, which would act as strong support going forward. The immediate resistance for the index is seen at 14800 odd levels, above which, the momentum would be back in the hand of bulls for Nifty.
The Nifty Smallcap index has been rising for the last four consecutive trading sessions and reached the highest level since 9 April 2021.
Sectors that are looking strongest on short-term charts and are expected to outperform in the coming days are Banks, NBFC, PSU Bank, Infra, and Realty. These sectors could see a pullback rally in the days to come.
Nifty has been trading in a downward sloping channel on the weekly chart. Any close above 14800 would result in a bullish breakout for the medium-term and in that case, Nifty could march towards new all-time highs.
A close below 14150 would result in a bearish breakout, which could drag the Nifty towards 13600 levels. Till this range gets broken, the stock and sector-specific moves would remain in the market.
The recent moves in the Indian equity markets are just a reaction to domestic concerns. However, it seems that supply is getting absorbed at lower levels.Recent consolidation has extended enough and the market is about to enter into the momentum phase. Looking at the technical evidence, the chances of an upside breakout seem higher than a downside breakdown.
Here is a list of recommendations for the next 3-4 weeks:
The stock has surpassed the crucial resistance of the previous top on the monthly chart, which was placed at Rs 195 odd levels. Volumes have gone up significantly along with the price rise in the last 7 weeks.
The stock is placed above all the important moving averages, which indicates a bullish trend on all time frames. The stock price has been forming a higher top and higher bottom on the daily and weekly charts. The stock price has formed rounding bottom on the monthly charts.
In December 2020, the stock broke out from the long-term downward sloping trend line on the weekly and monthly charts. This breakout was supported by higher volumes too.
Post breakout, the stock went into the running correction phase for the next three months. In the current month, the stock has resumed its primary uptrend by hitting fresh 52-week highs. Indicators and oscillators have been showing strength in the current uptrend.
The stock price has recently broken out from the last 10 week’s price consolidation. On the week ended 23 April 2021, the stock surged 6 percent with a jump in volumes.
The consumer electric sector has been outperforming for the last many months and the same is expected to continue. The stock has registered fresh all-time highs on 23 April 2021.
The short-term moving averages are trading above medium to long-term moving averages, indicating a bullish trend in the stock.
(The author is a Technical Research Analyst, HDFC Securities)Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.