Writing in the column on June 25, I said, “…a possible point of forming a durable bottom. This straightaway means that the June 17 low should not be broken with any degree of conviction – meaning a bit of a poke here and there should be fine. With that as a caveat, we can now start thinking of longs as a clear stop-loss zone is available.”
Also mentioned was that speed was not to be expected in the following week. We didn’t break the low but managed to eke out a ranged week with a slight upward bias in the week thereafter. Writing last week, I said that we could be seeing a better trend emerge in the week that was to follow, using the Ichimoku indicators that had changed their look after a week of consolidation.
Nifty Target Price 16,900 Levels By Year-End: Nifty Future Buy Zone Price 16,000—15,900 [Buy On Dips]The week that has now just ended indeed had a much better move and proceeded to chalk up higher levels during the week. The two-week window thus took us from a low at 15,250 to nearly 1,000 points higher towards 16,250 during the week. Now, that was a nice move where traders could capture a decent chunk of the move because we were prepared for it.
Now, therein lies the key. The whole purpose of any analysis is to prepare ourselves for an eventuality. It is not necessary that what we envisage should happen. But if it does, then we can certainly give it a go and take good advantage of it. Luck happens to the prepared. To outsiders, it may seem like luck but we know that it occurred due to preparation.
The fly-in-the-ointment was expected to be the Rupee and it did continue to weaken, heading towards the higher targets given (80 to 80.50) but it did not have the same impact on equity trends as earlier. Perhaps, the RBI announcements of steps to attract forex flows may have had something to do with it, as well as the easing of prices of crude oil. Be that as it may, the Nifty managed to sustain its gains through the week to finish well.
The intra-week moves can be seen, as usual, in the first chart and moves like this are good enough for day traders to make some money.
The only thing that traders need from the market is consistency in the trend direction. Even if it be for just a few days. The trick is to then stay out of action in those weeks when the trend refuses to show consistency.
Hence, our analysis should be pointed towards finding consistency where possible.
The next thing we need to see is for momentum to start accompanying the price action. This is essential for sustaining the up-move launched. For starters, we have a trendline break. This can be seen in the second chart. The break confirms the divergence formed in the Relative Strength Index chart (also shown). The Directional Momentum Index indicator shown in the same chart has a very tentative cross of the DI lines and this bullish shift needs strengthening in the coming week. This can happen if the prices continue higher in the week ahead. So, next week’s rise is important from the point of view of continuing the advance even further.
The Q1FY23 numbers start flowing now. So the market can get its mind off the global triggers and focus on local ones starting next week. The initial numbers are, therefore, critical from a sentiment point of view. If they are good overall, it will provide a sentiment boost to prices- which shall then boost the oscillators and the whole thing can result in some good up moves continuing. Conversely, if the early numbers are disappointing, then they can also curtail the rally attempt and send prices back for a retest of the support zones. So, news flow is important too, for the next week.
That said, let’s look for resistances. Two weeks ago, I wrote that the prices can make a go for reaching the Ichimoku cloud.
The Kumo stretches from 16,500-16,950 levels. We can start with the lower of the two levels and build cases for the higher target in case that is surpassed with some ease.
This can be seen in the third chart.
So we await the following in the next week:
- The rise should continue further. Positive price action is needed.
- Positive news flow should emerge. Q1 earnings and others.
- Momentum indicators should strengthen further. The DI lines should move apart.
- The first level of resistance at 16,500 should be crossed for more gains.
Now, all may happen or none may. Or, there could be a mix. But whatever it shall be, we are prepared with our action plan. In case all occur then best to sit on existing longs or even create new ones. If some occur then we need to check for the probabilities of the others occurring as well. But if none occur then stop losses need to be tight. For now, the trading stop loss should be moved up to 15,500.
