Feb 12, 2023
Nifty to aim for 17500 if it holds 16800 support; Bank Nifty may head to 37300 soon; SBI, TCS stocks top bets
By Dharmesh Shah
NSE Nifty 50 index started the week with a negative gap (17172-17009) and traded volatile guided by global cues. However supportive efforts emerged from the lower band of consolidation (16800) on a couple of occasions which helped index to recoup intra-week losses. As a result, weekly price action formed an inside bar as Nifty oscillated within last week’s trading range of 17415-16825, indicating choppy consolidation amid stock specific action.
Immediate resistance is placed at 17500 is a confluence of:
A) Bearish gap recorded on April 18, 2022 placed in the range of (17475-17238)
B) 50% retracement of April decline (18114-16825)
Structurally, strong base at 16800 has been made as over past 17 sessions retraced only 50% of 19 session rally despite elevated global volatility which we do not expect to be breached in coming weeks as it is confluence of:
a) 50% retracement of the entire March 2022
b) 200 days EMA placed at 16860
Sectorally, we are positive on BFSI, Auto, Metals, PSU. IT offers favorable risk reward amid oversold conditions. Our preferred large cap stocks are State Bank of India (SBI), Bandhan Bank, Asian Paints, Tata Motors, Tata Consultancy Services (TCS), JSW Steel, Divi’s Labs while in midcaps we like Amber Enterprises, Apollo Tyres, Concor, Indian Hotels, Mahindra CIE, Gokaldas Exports, Persistent Systems, Phoenix Mills, NMDC.
The broader market indices are consolidating in the vicinity of 200 days EMA. We believe, base formation from hereon would set the stage for next leg of up move amid ongoing Q4FY22 earning season.
Bank Nifty Outlook
The Bank Nifty traded with high volatility as it oscillated in a 1200 points range to close on a flat note amid volatile global cues ahead of the US FOMC meeting schedule next week. The weekly price action formed a high wave candle with shadows in either direction signaling pause after last three week’s corrective decline In the coming truncated week, we expect the index to hold above the crucial support area of 35500-35000 and gradually head towards 37300 levels in the coming weeks. The index has already taken four weeks to retrace just 50% of its preceding four weeks up move (32156-38765). A shallow retracement signals a positive price structure and a higher base formation.
On the higher side 37300 is likely to act as a major hurdle being the confluence of the bearish gap area of 18th April & the 50% retracement of recent decline (38765-35511). Structurally, the current corrective decline is shaping out as a retracement of a strong 20% rally from March 2022 lows (32156) which has helped the index to work off the overbought conditions in the weekly time frame.
We expect the index to hold above the strong support area of 35500-35000 levels as it is confluence of
a) 61.8% retracement of the entire March 2022 up move (32155-38765) placed at 34800 levels
b) The rising 52 weeks EMA is also placed around 35500 levels
c) The recent swing low of second half of March 2022 is also placed around 35000 levels/.
Among the oscillators the weekly stochastic has cooled off from the overbought territory and is currently placed at a neutral reading of 42 signaling a pullback likely in the coming weeks
Dharmesh Shah is the Head – Technical at ICICI Direct. Please consult your financial advisor before investing.)
ICICI Securities Limited is a SEBI registered Research Analyst having registration no. INH000000990. It is confirmed that the Research Analyst or his relatives or I-Sec do not have actual/beneficial ownership of 1% or more securities of the subject company, at the end of 21/01/2022 or have no other financial interest and do not have any material conflict of interest. I-Sec or its associates might have received any compensation towards merchant banking/ broking services from the subject companies mentioned as clients in preceding 12 months.
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