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Nifty eyes 16,000 as sentiment indicators play cheerleaders

RSI, Stochastic indicators signal uptrend. If the index crosses and sustains above 16,000, it can cross 16,100, with some intermittent corrections and consolidations, experts say

June 27, 2022 / 03:19 PM IST

The Nifty50 touched the higher end of resistance at 15,900 in the opening trade itself on June 27 but dipped and strongly held its earlier support of 15,700. This is now the new resistance.

At a fundamental level, the rally is supported by positive global cues, with all global indices trading higher. Oil price, however, remains above $113 a barrel.

The Nifty was trading nearly 200 points, or 1.3 percent, to 15,896.6, at the time of writing this article, supported by all leading players. In fact, all stocks were beaten down in the recent correction, falling below the 200-day moving average (DMA). In the Nifty500, more than 80 percent of the stocks fell below the 200 DMA.

Generally, the 200 DMA plays a crucial role. If a healthy scrip falls below the 200 DMA, it is a sign of an oversold position and is considered a strong buying opportunity.

Now, the trend and sentiment indicators look supportive of this uptrend, which started off last week. The market had broken the two-week losing streak in the week gone by to post 2.6 percent gains.

Close

RSI, Stochastic indicators signal uptrend

On the daily charts, the relative strength index (RSI), the sentiment indicator, has moved up to 48 now, from the 28-29 levels on June 17. Overall, it has been giving a signal of an uptrend for more than a week, especially after hitting the oversold lines around June 17.

The second sentiment indicator, Stochastic, has given a positive crossover in the later part of the previous week and continued signalling an uptrend. Now, it is trading around the 54 level, up from the 30 levels on June 23.

Even on the weekly charts, both indicators are showing an upward movement, with a positive crossover by Stochastic a week back.

The moving average convergence and divergence (MACD) indicator gave a nice, positive crossover on Monday, which can be considered as a buy signal.

This indicator is a refinement of the two moving averages systems and measures the distance between the two lines.

North-bound

Hence, the Nifty can continue its northward journey, with the 16,000 mark being the next crucial hurdle. If it crosses and sustains above this mark, it can cross 16,100 but intermittent small corrections and consolidations can't be ruled out, with crucial support at the 15,500-15,700 levels, experts said.

"The Nifty could see a short-term rally till 16,000, and, then, the 16,135 levels, where it can fill the gap that was formed during the initials day of the month,” Way2Wealth said. On the downside, Way2Wealth placed the immediate supports at 15,600 and then at the 15,520 levels.

RSI (14) and the Stochastic oscillator have recovered from oversold levels, the brokerage said.

Positive strength sustainable

Vidnyan Sawant, AVP, Technical Research, at GEPL Capital, also said that the Nifty is sustaining above the two-week high. This shows the positive strength of the index.

The index’s immediate intraday resistance is at 15,935. If it sustains above that level, the Nifty may touch 16,025. However, its support is placed at the 15,830 and 15,749 levels, he added.

As far as chart patterns are concerned, there was a small bearish candle on the daily charts as the trading levels (at the time of writing this article) was below the opening levels. Overall, it signals indecision on the daily charts.

Even the volatility is on the higher side, trading above the 20 mark. Unless it breaks and sustains below 20, stability in the market looks unlikely, experts said. India VIX, the fear index, traded at 20.88 levels, up 1.6 percent.

‘India VIX should cool down’

"India VIX is slightly up and hovering at 21, which indicates that the volatility is likely to continue and create discomfort for the bulls. It needs to cool down for some stability in the market," Chandan Taparia, Vice President, Equity Derivatives and Technical, Broking & Distribution, Motilal Oswal Financial Services, said.

He further said the index has surpassed its key level of 15,735 but there is some pressure at the higher levels of 15,888-16,000. Overall, he expects the index to trade in a broader range, with a capped upside. Hence, at the current juncture, one can be selective with stocks, the market expert advised.

The market breadth is positive, which indicates some support at the lower levels. More than five shares advanced for every one decline on the NSE.

The Nifty Midcap 100 and Smallcap 100 rallied 1.5 percent and 2.1 percent, respectively, while on the sectoral front, buying was seen in all sectors, including auto, FMCG, IT, metal, pharma and banks.

Disclaimer: The views and investment tips 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 making any investment decisions.
Sunil Shankar Matkar
first published: Jun 27, 2022 03:19 pm
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