Nifty Today Outlook Report - 06th Jun, 2022

Nifty started this week with a gap up opening on Monday and then consolidated within a range for most of the week. The index witnessed support near the previous breakout zone of 16400-16450 and due to the global markets rally we again witnessed a gap up on Friday. However, the index gave up the intraday gains on the last trading session and ended below 16600.

Overall it was a good trading week for the bulls as markets witnessed positive momentum and a recovery was seen from the support zone of 16450-16400. However, the data turned bearish ahead of the last trading session where we saw FII’s unwinding their long positions in the index futures segment and forming some fresh shorts too. Their ‘Long Short’ ratio declined from 51 percent to below 40 percent which does not bode well for the bulls. Also, the market was approaching the resistance of ‘200 DEMA’ around 16750 which coincided with 61.8% retracement of the previous correction.

Nifty Today:

This made us cautious on the gap up opening on Friday and we then witnessed weakness in certain sectors such as Auto and Banking which were the leaders in the recent pull back move. On the hourly charts although we formed a higher high on the Nifty index, the ‘RSI Smoothed' oscillator formed a lower high indicating a negative divergence. This divergence after the recent rally of 1000 points indicates limited upside for the time being, and hence we could see the market resuming its corrective phase. Hence, we advise traders to avoid aggressive buying as an up move led by few sectors or stocks is not a good sign.

As far as levels are concerned, 16750-16850 will be seen as a major resistance zone now and the immediate support is placed around 16450-16400. Once this support is breached, our markets could go correct towards 16200-16000 in a short period of time. Traders should also be vigilant on the global markets and the US Dollar index which has shown signs of an up move again after the recent corrective phase. Since our markets have recently seen high negative correlation with this index, any upmove in this index could be a factor to worry for.