Weekly Market Outlook for 1st August to 5th August

Nifty (17158)                                                                                                                  1st August, 2022

                                       Nifty reclaims 17000 with broad market participation

Nifty Today:

During the initial part of the week, Nifty corrected marginally as the momentum readings on the lower time frame charts were in the overbought zone. However, the index resumed the up move ahead of the FED meet and the positive reaction by the global markets post the event lifted our markets higher and Nifty reclaimed the 17000 mark.

The July month proved to be a relief for market participants as after a sharp correction in the previous three months, Nifty rallied in this month and posted gains of over 8 percent. The up move was led by the banking and financial space but off late all the sectors participated which resulted in a broad market rally. Now the Nifty has reclaimed the 17000 level, so let’s see some data to predict whether the up move will continue in the short term or reverse. Firstly, if we look at the derivatives data, the rollovers were slightly lower than the average and the up move in July has been mainly due to a combination of short covering and long formation. FII’s who were aggressive sellers in the last three months have covered their short positions and infact they have started the August series with net long positions in the index futures. Technically, the index has formed a ‘Higher Top Higher Bottom’ formation on the daily chart and is retracing the previous downtrend. It has surpassed the 50 percent retracement of the entire downmove from the high of 18600 to 15180 and is now approaching the 61.8 percent retracement which is seen around 17300. The near term support for the index has shifted higher and is now placed around 16930 while the medium term support base has shifted higher to 16550 and 16420. The only cautious factor on the short term charts is the momentum readings which are again in the overbought zone. However, when in a strong trending move, it is often seen that the upmove continues in the overbought zone as well until any divergences get formed.

So the data is still positive and until the index breaches any important supports or witness short formations by the stronger hands, one should not pre-empt any reversal for now. On the higher side, 17300-17400 will be the important resistance zone and hence traders can look to book profits and take money off the table there. Trading with a stock specific approach and booking profits at higher levels should be the approach to trade the markets in the coming week.

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