Nifty In Technical Charts: Fed Speak To Power The Next Index Up

And on a daily basis, it was even more frustrating, perhaps. We are on this 'buy-the-dip' approach. But this damn week, there was no dip either! Everyday we went on raising the dip buy level but to no avail. And if you are a chart follower, then even more difficulty. The monthly candle (you will keep increasing the time frame to find some damn signal, after all) is still looking decently bullish, what with a nice lower shadow to boot!

And fundamentally, you had information showing up on all sides. Oil is down and then it is up. Dollar is down and then it is up. The Dow skids and shoots up and then falls again. Rate cut likely, says the rumours, and the bulls get cold feet just ahead of Friday’s Jackson Hole meet. I dare say that the US events kept our chaps locally even more confused than they already were!

And to make matters worse, the leadership changed every day. Every sector had its day and nothing had a continuation. Before you could find reason for the up-move, it was over and, in a trice, something else was up, making you run after that one.

No wonder if traders are feeling exhausted at the end of the week. Momentum traders—caught behind. Support-buy traders—bowled out middle stump. Resistance-sell traders—caught out in the slips. Swing traders—hit wicket. Jobbers—run out. Scalpers—maybe got in a run or two max.

But light at the end of the tunnel? Chart 2 shows Bank Nifty intra week on 30-minute chart. And here, we can note a pattern different from the Nifty. It appears that the Bank Nifty is building itself a pattern of revival. A breakout past 51,100 ought to clinch it. Now, that may be of some interest to traders because the Bank Nifty—quite the fountainhead of index trading—has been in the doldrums for weeks now. A revival there will certainly get trader juices flowing again. Besides, bank stocks have a good weight on the Nifty (as we all know) and some revival there will certainly be a positive for the Nifty as well. So, as Humphrey Bogart once said, “Here is looking at you, kid”.

In addition to this possible light at the end of the tunnel, we have reasons to relax as there are plenty of more sector indices that are just raring to go! And those are numerous enough to tilt the balance back in favour of advances. So, no worries on that, even if there were to be some corrections in the Nifty. Be bullish is the message those sector index charts are sending out. So, let’s just grit our teeth through frustrations and local fears and stick with the main trend. Something or the other will always be picking up the baton and continue the relay race. IT, Pharma, FMCG, Auto just to name a few. Chart 3 shows three of these names for reference. Just see the strong trends essaying here, along with intact momentum.

Now here is one sector I am not bullish on. This is cement. See chart 4. I know that almost all are bullish on the prospects but see what the chart is saying to us.

An all-time high in an ersatz cement index (created out of top cement stock names), happened in early January 2024. It was beaten back swiftly (first X). Another attempt to cross and create another high was made in July 2024 (second X). Despite attempting to move higher for about 4-5 weeks, the attempt failed and prices got pushed back, below the breakout zone. Since the two attempts were multiple weeks apart, this can qualify for a double top under formation.

So, I added RSI zones to chart the momentum on the attempts. The first high on RSI corresponded with the first X. So far so good. Comes the second high X and there we find RSI faltering around 60-64 levels. In my experience, a double top formation with a resistance RSI near is a very strong signal of a top getting in place, whatever be the time frame of the chart—meaning, this signal works on ALL time frames. And, here, we are looking at a weekly chart.

I have added a trendline of support for trend measure too. If that breaks in coming weeks, then that is one more nail in the coffin. Finally, the last minor swing low prior to the second X—if that breaks then there is pattern completion too.

Finally, there is a time element kicking in for the first week of October. If price action around that time confirms any bearishness, then all elements for a large correction in the sector could occur.

Why is the chart showing us weakness building in? I reckon it may be to do with the fact that there are two large groups now in the market place trying to grab dominance—Birlas and Adani. It may have to do with turf war leading to pricing war perhaps. In short, some confusion ahead. Some smaller cement companies may benefit in this fight as they get gobbled up for building capacities. But that is a sideshow. Something along the lines of what is happening in paints too, perhaps?

Now, how to approach this information on the charts? Well, for starters, one can stop buying cement stocks as medium term investments. Second, if you hold cement stocks that are in good profits, then could consider booking out a good chunk of the profits. Third, if you have entered recently, then can consider an exit and move to something else. Fourth, no signal to short yet, but can begin looking for tell tale signs to commence on that path, if so inclined.

Getting back to the main story of the week ahead, the shift towards Bank Nifty is already on? PCR for Nifty is 1.20, while that for Bank Nifty has dropped to 0.85. Neutral market trends of the week ended might suggest a possible gap-up, now that Powell speak has finally confirmed intent to cut interest rates ahead. That ought to be good enough to produce some cheer in the market. It will be interesting to watch how well a gap up can be held on Monday and ahead—therein lies the key.

It may be noted that a new high, were it to be printed in the weeks ahead, will further seal in the June 4 bottom as a long-term low. I already have it labelled as the important pivot for the future, making it the final line in the sand for bullish long positions (for short, medium and long term). This will now also seal the Aug. 5 low as another important one for the medium term players. Finally, 24,400-500 area will also get sealed in as a short-term low as well, making all these points important swing lows and stoploss points.

We have been steadfastly bullish on the market and the last time I wrote about some hesitation was back in mid-May (see At An Inflection Point... Stay Alert) and again in mid-July (see Caution Advised. Trim.), but the market kept bouncing back and so did we. The caution of mid-July was on the button as we went through some tumult till August. But, essentially, the Nifty has been fluctuating around the 24,800 levels since then till now. So, ideally, have captured most of the Nifty’s moves ever since a buy call around the 22,500 levels.

That brings us into the present and here we are, continuing to be bullish and looking for higher! The stops have never been threatened in any manner during this journey and if one had held one’s nerve through a few rocking sessions, we should have been able to make it out till here. For the record, I am still long my basic quantity of Nifty futures and plan to continue holding on to that. The Fed trigger ought to be good enough to create some fresh upside traction that can take the Nifty to new highs yet again in the coming week. First of the turn dates for September is Sept. 2, and it would not surprise me to see that event happen by that date.

Looking ahead, I spot 25,430/25,840 as the next immediate targets. For an outside target projection for now, I would want to pump for 26,300 as the next high once the first set of targets are crossed.

I will leave you with that happy thought and hope that the market wont give us a chance to revise it down any!

CK Narayan is an expert in technical analysis, the founder of Growth Avenues, Chartadvise, and NeoTrader, and the chief investment officer of Plus Delta Portfolios.

The views expressed here are those of the author, and do not necessarily represent the views of NDTV Profit or its editorial team.

Disclaimer: The views expressed here are those of the author and do not necessarily represent the views of NDTV Profit or its editorial team. NDTV Profit is a subsidiary of AMG Media Networks Limited, an Adani Group Company.