On the upside, three-digit Gann number of 101(00) would act as a hurdle on an immediate basis. Failure to surpass the same, would result in stock specific correction.
Pritesh Mehta
This week's index journey was more action-packed and aching than Frodo Baggins’ voyage in JRR Tolkien's 'The Lord of the Rings'. We saw Nifty retreating from midpoint of Gann number (i.e. 10,350). Twice during the start of the week, it attempted to surpass hurdle zone of 10,300-10,350, but it failed on both instances. Confluence of supply zone, weakness in global markets, inability of Nifty Bank, Nifty Financials and Nifty FMCG to surpass the peak created in April 2020 (i.e. sectors with higher weightages) led to sharp reaction on downside in Friday's (June 12) opening trade.
Nifty marked a low (9,544) below previous week's low but quickly regained control above two-digit Gan number of 96(00) and led a fierce comeback. In the process, it filled Friday's downward gap, implying strong support around 9,600.
We had mentioned in our last week's article, that overbought breadth in Nifty & broader markets is likely to result in slowdown in Nifty's fast and furious upmove. Post initial decline, pace of recovery in Friday's session took us by surprise, but presence of overhead hurdles (10,200-10,350) is likely to make life difficult for bulls going ahead.
Regardless of Frodo's Friday heroics and a 55 points uptick, descending series of highs and lows on the Nifty remains intact. Going ahead, a break below 96(00) only would result in confirmation of shift in the orbit on the downside. On the upside, three-digit Gann number of 101(00) would act as a hurdle on an immediate basis. Failure to surpass the same, would result in stock specific correction.
Despite Friday's comeback in Nifty Auto index, ratio chart of Nifty Auto/Nifty index shows completion of ABC breakout target, hurdle of 45 degree-TL and 61.8 percent retracement. Back in July 2019, ratio had faced supply zone around 61.8 percent retracement mark. It implies, a pause in out performance of Auto stocks. Fresh longs should be avoided in auto stocks from hereon.
BankNifty struggled to sustain the momentum which was in place for last two weeks as high of April 2020 and presence of three-digit Gann number 218(00) resulted in a correction of 2 percent in this week's trade. Ratio of BankNifty/Nifty on P&F chart shows formation of rising double top buy and sustenance above upward sloping 45 degree trendline. A move above 21,900 is essential for out performance of Banks against the Nifty.
The author is Lead Technical Analyst - Institutional Equities at YES Securities.
Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
