Nifty likely to consolidate, focus shifts to midcaps

Pritesh Mehta

Inability to break above 11,300 should not be the reference point of this week's action. Despite the indecisive candles post Tuesday's sharp turnaround, index has managed to sustain above the three-digit Gann number of 111(00), Meanwhile, BankNifty continues to be AWOL (missing in action) in recent run-up. In this week's trade, Nifty has done well to find support around 10,850-10,900 zone (i.e. confluence of Gann numbers & presence of 200-DMA) and recover Monday's fall.

Intraday declines have resulted in sharp recoveries. Nifty has been inching closer towards hurdle zone, as per Gann analysis; a decisive move above midpoint of current three-digit Gann channel (i.e. 11,350) is required to break past the supply and confirm a shift in the orbit on the upside. Despite failure to break above recent peak, index has been consistently holding above confluence of support zone. Such type of price structure can be viewed as a pause after recent advance.

Among the broader indices, Nifty Midcap 100 index made big moves (up by 4 percent this week). By Thursday's EOD session, around 55 percent of Nifty midcap 100 components were trading above its 200-DMA, which is a sign of strength. Around 21 stocks from the Nifty Midcap index are trading 3-month high, which is a bigger number in terms of participants; when compared a month back.

Ratio of MIdcap/Nifty has staged a breakout from downward sloping trendline, implying outperformance of Midcaps. On standalone point & figure (P&F) chart (0.25 percent *3), Nifty Midcap 100 index has given a breakout from a bullish triangle pattern and bullish turtle breakout, implying continuation of recent momentum. Multiple Vertical counts on the upside are still open which indicates big room on the upside.

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Pritesh Mehta

Lead Technical Analyst - Institutional Equities|YES Securities

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There's no looking back as far as the ratio of BankNifty/Nifty' direction is concerned. Continuing recent decline, it is trading closer to the low which it marked in May 2020 (around 1.90). On rallies, it is facing resistance at downward sloping trendline, resulting in short-lived pullback & as a result; underperformance of banks have been a regular theme. On standalone P&F charts, (0.25 percent *3), BankNifty has formed a low pole pattern. However, it is yet to trigger any other bullish signals yet. Moreover, three-digit Gann number of 225(00) has been acting as a big hurdle.

Nifty Metal index continues to hog the limelight (up by over 7 percent this week). P&F ratio chart of Nifty Metal index/Nifty shows a Bear Trap reversal along with formation of bullish anchor column and break above 10-column moving average, underlying the strength of metal stocks. With CRB commodities index bouncing off from support zone, action back home in metal stocks is likely to be positive.

This week Nifty gained 1.3 percent, however 18 out of Nifty50 stocks managed to beat the benchmark index' return. Stocks like Tata Motors and Tata steel outperformed the most, gaining 10-14 percent this week, highlighting stock specific action going ahead in near term as focus will continue to be on midcaps.

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

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