Nifty In Technical Charts: Sit On Your Longs And Add On Dips

Finally, we have reached new heights. Still, there will be people who quibble.

Some market participants perceive new highs as an increase in risk, as the market now has a higher likelihood of falling and potentially more room for further declines. So, not happy. For others, it is deepening frustration because their anticipated reaction did not come, and now the market is running away without them! They cry, "It's not fair," as if the market owes them a reaction to comfortably enter.

There are those who constantly complain: "Oh, the pace is too slow, the breadth is not positive enough, the FIIs are not buying enough," "Look, promoters are dumping goods, valuations are expensive, results are not good enough," and so forth.

The only thing all these things do is keep you from participating. But for those who followed the trends diligently, like us, the new high was just another day at the office—one that we had been anticipating and planning for as well.

And that is the way it should be. The market will behave as it naturally does. What we do with it is what makes all the difference.

The week, as can be seen, was pretty smooth. Dull and boring, but smooth. On the day of the Reliance AGM, there was a slight surge in volatility. And then, a good finish. The weekly candle showed a strong upward trend, so those with doubts should leave them at the door!

Bank Nifty tried to be part of the proceedings but is still limping along. It has still not been able to contribute its mite.

The entire market experienced significant movement, particularly when the NSE500 index reached a new all-time high. So, the relief is that the (market) breadth accompanied the rally in the indices. Also, confirmation that the intent to move higher is still very much intact. With two popular sectors—IT and Pharma—continuing to give it the charge, the weakness in banks is not being missed.

This move is starting to resemble the post-election move—a steady, if unspectacular, gain. Actually, those are the better ones, as the market doesn’t get overbought even in the short term. The market moves through rotations, thus preventing any specific area from being overloaded. In this week, perhaps, that aspect was particularly accentuated—with leadership changing every day. Now, that causes some pain for active traders, but for those that are playing a complete swing, this poses no problems. Think about it. There are many stocks this week that moved up well—only if you were holding on to them.

But the Nifty is nearing the first of the targets given last week (25,430) and seems to be doing this without breaking out a sweat. This could well mean that the second target, too (25,840), should get realised soon. With new highs getting recorded, the low of Aug. 5 now gets cemented, and a change in trend status gets postponed by a few weeks, at the very least. So, that determines our playbook—we simply continue to be buyers during dips, with a renewed trading trail stop at 24,000.

Last week, I had shown a rising triangle pattern on the Bank Nifty intraday chart, hoping for a nice breakout. Well, the breakout did happen, but there are no fireworks yet. Perhaps the next week will witness a shift in focus towards this index, which could potentially propel the Nifty further. Chart 2 displays the updated charts.

The Bank Nifty has a significant amount of ground to cover, having only made a 50% recovery of the fall from its July 4 high, while Nifty and other indices have achieved all-time new highs. So, we do need to keep an eye on this one.

Eyes were on the US markets from last week, and after the Fed pivot, there was some activity involving NVidia stock (which is now among the biggest and most widely tracked US stocks), but both of these events have moved past. Now, the jobs data due out on Sept. 6 may play some role in deciding the sentiment in the US as it may tilt the balances regarding expectations about the interest rate cuts, etc. In that, a look at the dollar index chart shows us some bearish leanings of this index. Down into an important former swing high pivot supports during the week. But continuation lower could open up room for a decline till 96 levels, which would mean hardening INR and stronger Nifty. Momentum, as can be noticed on the chart, is quite limited for the index right now.

Helping hands, like currency possibilities above, are showing up all over. Last week also, I outlined a few. What that is needed is for us to believe!

In the current rise, we have seen 12 consecutive days of higher close, but gains are a meagre 4.6%. In contrast, the previous record was 11 days in Oct. 7 and gains were 14.9%. That kind of shows a lack of belief yet. Sometime ago, I had spoken about the possibility that the market is not ready for a meltup—is that now getting set up? I think there is still no one looking for a meltup, and everyone reports about nervousness at the market highs. Ideal sentiments perhaps for such an event? Seasonality is being spoke of about September being a negative month (mostly), but I don’t believe the events leading up to the new month are hinting at that possibility as of now.

So, with the Nifty chugging along, I prefer to sit long on my positions and also await any intraweek dips to buy. We keep our faith in the higher targets for the Nifty given earlier and seek not to interfere with that journey by not getting into too many trades. There are times to sit tight, and there are times to be very active. Currently, it is the first one. Sit on your longs and add on dips.