Nifty defends Gann number 91(00) but lacks conviction, RIL seen at record high next week

Pritesh Mehta

Not the ideal start to life for bulls in the month of May as Nifty succumbed to a cut of 5.7 percent in the very first session of the month. Negative set of cues from global markets resulted in a gap-down opening. Presence of multiple hurdles around the 10,000-mark after a sharp rally last month, contributed to Nifty's inability to sustain the top.

However, despite this week's negative returns of 6 percent, Nifty has done well to defend two-digit Gann number of 91(00). In Wednesday's session, it marked a low of 9,119 and staged a sharp rally. Comeback of RIL in second half of the week provided the index much required ammo to continue Wednesday's recovery.

On point and figure (P&F) chart, Reliance Industries (RIL) has triggered a double top buy pattern, set-up has turned bullish and it is likely to re-test its all-time high in next week's trade. Ratio of RIL against Nifty shows strong outperformance with formations of double top. However, Banks & Financials are still underperforming.

Pritesh Mehta

Lead Technical Analyst - Institutional Equities|YES Securities

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Two-digit Gann number 91(00) & midpoint of the previous trading range i.e. 9,100 have acted as a support in this week's trade. Even anchor point zone is placed around the same (i.e, 9,100) on the P&F chart from the low of April's upmove and previous week's peak.

Meanwhile, Friday's trade has surely left a bittersweet taste for market participants, because positive global cues and a sharp rally in opening trade resulted in day’s high of 9,383. However, things changed in second half as BankNifty turned negative and closed below 19,500 mark. So only HUL, RIL and select pharma companies kept the index in the green while others were struggling.

During a period where market is creating whipsaws, Nifty would gain credence on a convincing move above 9,350 (i.e. midpoint of current two-digit Gann channel) towards the 9,600 mark.

So, confluence of support provided respite in this week's trade and thereby respected the point of polarity zone. However, sell on rallies and buy on declines movement (evident post a fall from 9,900 levels) has led to a choppy environment on Dalal Street. Choppy market is not an ideal time to make money on the index.

Ratio chart of FMCG/Nifty50 saw a sharp correction of more than 15 percent in last few weeks driven mainly by HUL. However, ratio has bounced back from pattern re-test zone. Even momentum indicators have reversed, marking a higher low in the process. Post recent correction, HUL, Britannia & Nestle are expected to outperform from the FMCG space.

The author is Lead Technical Analyst - Institutional Equities at YES Securities.