Nifty This Week: Technical Charts And More – Celebration Or FOMO?
Last week we ended with a small warning based on intraday charts that there may be a pullback of sorts. Monday proved that to be the case, and as has been seen earlier the fall was swift, helped by a down-gap start for the week on global events. The prices cracked through the levels given in the last column and headed down to a low at 17,335. Bears were rubbing their hands in anticipation of some gains now, after having been out in the cold for over 18 months now. But alas! That was not to be. The same pattern as before repeated, with Tuesday beginning weak and restoring the status quo the very next day with a strong drive. After that, the bulls just kept pushing the pedal for the rest of the week and succeeded in inflicting another severe defeat on the bears.
The Sensex hit 60,000 and balloons went up while the Nifty pushed to new all-time highs too. So celebrations all around, one would suppose. But is that really the case yet? Not so, I would wager. There are so many who are caught up in the ‘missed out’ feeling of this entire advance that there aren’t too many to party. How sad. One of the most fantastic bull markets since 2006 and most have missed out, what can be more miserable for a market player. The galling part is, newcomers have all had a ball and turned into millionaires while those who have been at it for 10-20 years are still struggling with their old portfolios!
As usual, here is how the week panned out.
The market actually did what is called the classic ‘one-and-half-day reaction’. This is very common in fast-moving markets and is a killer pattern to spot for speedy recoveries and new thrusts. True to form, the prices ratcheted higher on Thursday to a new high and carried further on Friday. We have a slight trimming from Friday highs but that is par for the course after a hectic week as people take home their money.
What the movements of the week did was to help revise the support trendline once again to the latest minor low, since the prices made a new high.
This allows the active traders to revise their stop-loss levels to under this trendline, around 17,565.
What sayeth the option positions? Well, the max pain continues comfortably higher and so the bullish bias meter is still ticking. The put-call ratio dropped from a recent high near 1.59 to around 1.20 during this week as Friday saw some additions to Call Open Interest in nearby strikes. The 17,900 strike, for example, seems to have seen a large straddle position being added, and towards the end, the premium on this was around 240 points combined. This should argue for a support case near 17,660 and a resistance case near 18,140.
The next chart shows the PCR dropping as the Nifty rose, particularly in the last three sessions. So short put holders may have taken some profits.
Curiously though, the India VIX has not shed much ground from the slightly elevated levels of last week despite the push to new highs. Don’t know what to make of that, as yet. It had shot out a warning last week but barring the small dip on Monday, the bulls were resilient through the rest of the week.
The breadth scenario was pretty solid too, in the last week. Barring auto, commodities, pharma, metals, and PSU banks, every other sectoral index managed to haul themselves to new weekly higher thrusts, implying that the rise was indeed broad-based. Metals had a poor week with prices actually faring the worst. Private banks are looking up and managed to lend a hand to the Bank Nifty and the Nifty Financial Services index. Reliance weighed in for energy and the Nifty. The long-awaited rally in ITC finally emerged and it helped push the FMCG index higher and also batted for the Nifty.
The weekly chart of Nifty shows a normal-sized candle without any out-of-the-ordinary volume characteristics and momentum indicators are all positioned fine. This ought to ensure continuation rather than reversals. The fear, if any, is only in the mind... definitely not in the market.
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.