Nifty This Week: Technical Charts And More – Why These Bulls Don’t Scare Easy

A bear statue faces a bull statue outside the Frankfurt Stock Exchange. (Photographer: Peter Juelich/Bloomberg)

Nifty This Week: Technical Charts And More – Why These Bulls Don’t Scare Easy


Matters didn’t look too rosy as we finished the trading week ending June 18. But after a shaky start on Monday, the bulls were ready to battle. First, they held off the sharply lower open on Monday and then pushed the prices back. After that, they managed to contain two days of declines and created yet another higher bottom in the process. For the last two sessions, they were in better condition with a steady push higher.

In the meanwhile, the rollover for June was pushed through where it was evident that some Nifty longs were pared while shorts in Bank Nifty were carried over. Stronger trends in global markets gave the bulls a good opportunity to put the squeeze on the balance bears. Hence it was a directional type week (two days down and two days up) but it certainly was quite tough to discern the direction. Pictorially, the week appeared thus.

Nifty This Week: Technical Charts And More – Why These Bulls Don’t Scare Easy

New actual highs are in balance as yet on the daily charts but the same has already been punched out on the monthly chart as the high was made during mid-month. The sentiment, as a popular cliché goes, was ‘shaken but not stirred’.

The fact that the confluence of price, time, and sentiment could not bring about the break of the nearest minor low—on a closing basis—was proof enough of the resilience of the bulls. Nothing is making the long-holders exit their portfolios.

It is just the long unwinding of trader longs and some shorts that show up at lower levels (that get quickly squeezed out too) that is keeping the trends going. This is a point I have made in earlier letters too and I find there is still no change in the behaviour. It is going to require some big event to shake up the holders to exit their portfolios. Else, it requires the market to become greatly overbought in terms of participation (particularly in leverage) for the trends to become fragile as they go higher. But the strict imposition of margins is making that more and more difficult.

So, if that is established as the current scenario (bulls resilience) and you are left out in the cold or have exited somewhere along the way, then you have to find a way to get back into the game. I think the best way there would be to simply treat the last swing low in the market as Point Zero.

Since the Nifty is now pushing to new highs, the nearest point zero can be the week’s low at 15,465 or if you want to be a little more generous, then there are two more swing lows at 14,620 (May 14 low) and 14,155 (April 22 low).

The advantage of doing this lies in the fact that if you don’t have much, to begin with, you don’t have much to lose. You can be bold when you aren't trying to protect something. The biggest problem that many people have in the market is that they are looking back to the March 2020 lows or some other higher bottom lows of last year and going, ‘Oh it is too late now’ only to look back and sigh, ‘if only I had bought one of those dips’! So, I am offering a simple solution to beat this emotional issue. Set those lows as your stop and dive in. If they are lost, then you just surrender. Maybe it is too late, or maybe there is lots more, you will never know until you get into the game. Playing as a bystander is such a waste! Here is the picture of the daily Nifty.

Nifty This Week: Technical Charts And More – Why These Bulls Don’t Scare Easy

The chart is overlaid with the Ichimoku indicator. Evident here is that all elements are in full bullish mode and may take some work to be reversed. The three points for marking zero are shown with arrows. Based on your risk profile these should be the three levels – the first is for traders or very short-term players; the second is for medium-term players and the third and more distant one is for longer-term players. An arrow is on the RSI and it appears that a positive reversal pattern (had mentioned its possibility in last week’s article) did indeed kick in and save the day during the dip. So with price and momentum and pattern backing you up, all you need is a reference point for risk. I kind of like the second arrow (the May low) as it is a bounce from a flatland pattern on the Kumo – but hey, each to his own.

I had shown the breadth situation several weeks ago as a point to aver the strength of the uptrend. I repeat the same chart updated for the quarter. This chart is from my software Neotrader. In the chart, you can see that the breadth is almost completely green – meaning strongly positive. Next, note that the green itself is divided into two, a darker and lighter shade of green. This is done to underscore the strength of the positivity. In sectors like chemicals, media, and metals, etc., note the extent of dark green (meaning strongly positive). The chart is created with the NSE 500 as the universe. The number within the blocks refers to the percentage of stocks from within the sector that are showing the respective trends. The only negative pockets (that too just a sliver of it) are seen in FMCG, financial services, I.T., and services where a thin red line is visible indicating that there is only a very small percentage of stocks that are yet to recover until now.

This dominance of green clearly shows that people are happy to continue buying and holding on as well. The strongest performer has been the metals space where all stocks are gainers with 90% of them being strong gainers.

With this kind of breadth continuing, the chances of a big decline without some major event are very difficult.
Nifty This Week: Technical Charts And More – Why These Bulls Don’t Scare Easy

Now here are some more interesting stats that I culled out from Neotrader. This is a table showing the Bull and Bear scores for the two main indices across different time frames, using the Ichimoku system. The rating is on a scale of 0-98.

Nifty This Week: Technical Charts And More – Why These Bulls Don’t Scare Easy

Notice the almost complete negation of bearishness across all timeframes. This too would suggest that the rise ought to continue. Perhaps when most of them reach 98 or so we may be at a turning point once again. In particular, notice that the daily and weekly scores are 0 for both indices meaning that the longer trends are strong and it is only in the short term (intraday or a few days) that the bears get a chance now and then. Neotrader has many such scoring systems for candlesticks, indicators, pivots, etc. that make it convenient for us to read the status of the market.

It appears that bulls are clearly ready to battle to hold their gained territory while the bears are only able to make some skirmishes. Given that as a background, the simple thing is to just stay long in this market. I have suggested a way out for people who are out or on the sidelines to get back into the game with some defined risk.

Among sector indices, IT stands tall so that may be the area to focus on. Many stocks here have hit a five-year new high close. The index for MNC stocks also shows a robust chart. This is an area of high comfort and no one quite looks at valuations here. In markets hitting new highs, these stocks are quite likely to participate if only from the fancy point of view. Interesting to find that the PSU Bank index is showing signs of some revival and therefore, traction higher seems likely. This is an area of high participation by all segments of the market and a big rally there has been long-awaited. Let’s see if the market obliges.

So we look forward to the coming weeks with some expectations. Pullbacks seem done and dusted and have given us new reference points to set stops. Sectors identified. We are good to go.

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.

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