Nifty Today Outlook Report - 20th Jun, 2022

The week gone by completely belonged to the bears as the Nifty started the week with a gap down and corrected sharply to end below 15200 with a weekly loss of over 5 percent.
 

The bears had a firm grip on our markets in the last two weeks wherein Nifty corrected from 16800 to 15200 in a short period of time. In these two weeks, the global markets too have corrected due to which our markets have reacted negatively.  

Nifty Today:

Post the recent correction, the momentum readings on the lower time frame chart have now reached the extreme oversold zone and such setups have usually resulted in pullback moves in the recent past. On the daily chart, although prices have formed a lower low, the ‘RSI Smoothed’ oscillator has not yet breached the previous swing low.

So any pullback move from here would then result in a positive divergence on the RSI with the index. Also, recently our markets have seen a high inverse correlation to the U.S. Dollar Index and after an up move from 101.5 to 105.5, this index has shown signs of correction in the last couple of sessions. So if the dollar index gives any pullback move to retrace the recent upmove, then it will be seen as positive for equities.

In the derivatives segment, the majority of the positions in the index futures segment by FII’s are on the short side and short covering by the stronger hands could lead to some up move in the near term. Hence, traders are advised to book profits on short positions and look for buy side trading opportunities from a one to two weeks perspective. The short term supports for Nifty are placed around 15000 and 14800 while the pullback move in Nifty could lead Nifty towards 15650 in the coming week.

The Bank Nifty index has not breached the March swing lows although Nifty has done that. Also, some of the index heavyweights from the banking space are trading around the support zones. So in case of any pullback move, the Bank Nifty index could see a relative outperformance and take the leadership to pull the benchmark higher.