Below 10,670, Nifty could arrest around 10,550, as it has spent maximum time around this level in last 12 months
Shrikant Chouhan
Kotak Securities
Despite negative news flow like US-China trade war, the US government shutdown, rise in crude prices, weak set of numbers from technology giants, weak monthly auto numbers, Rafale deal and the coalition of parties against ruling government, Nifty is turning better on a bigger time frame.
It is surprising but happens most of the time in the stock market. The reason behind it is that the markets are already depressed and have factored these news events in the price.
Since last three weeks, Nifty is forming bullish reversal pattern on weekly basis. We have witnessed a Hammer and Bullish Harami formation on weekly charts of Nifty in the last three weeks.
Both these formations indicate significant selling pressure at the beginning, that ends with sudden capitulation. Even if we consider Hammer and Harami reversal patterns based on candlestick formation, they both together form Triangle like formation, which is visible the daily chart.
Technically, we are of the view that the markets are completely depressed due to a flurry of bad news and it is time to turn the tide on the other side. For the week, 10,730 and 10,670 would be strongest supports and 10,870 and 10,930 would be the biggest hurdles. Below 10,730, traders have to be cautious as the breach of 10,670 could trigger panic in the market.
On the other side, break of 10,870 would generate buying steam and above 10,930 we could witness exploding activity.
Based on above analysis, our take is to trade on the long side above 10,870. Above 10,930, traders can double their positions as Nifty would start rallying to 11,200-11,300.
Below 10,670, Nifty could arrest around 10,550, as it has spent maximum time around this level in last 12 months, however, as the trading range has narrowed down in last three weeks, the weightage has moved to 10,670.
The author is Senior Vice-President (Equity Technical Research) at Kotak Securities.
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