By Rohan Patil
The Nifty 50 index on Friday saw a huge gap above its consolidation range but couldn’t hold onto its early gains and was down more than 150 points from the day’s high, but has when even managed to close 1% higher on the weekly chart. . Price has found support near its exponential moving average at 21 and aside from this hint, it continues to trade above its most important averages on the monthly chart. Prices have formed a bullish hammer candlestick pattern on the monthly chart and it will be interesting to watch its next month candle for confirmation.
The RSI momentum oscillator (14) over the month peaked at nearly 80 levels and since then has declined below 65 levels. The oscillator on the monthly scale has made a leading formation and indicates that momentum may be drifting lower.
Nifty faced strong resistance near the 16800 levels and witnessed a sell off from its previous trendline resistance. If prices break above the 16800 levels, strong momentum can be seen in prices. Immediate support for the Nifty is placed near 16445 and below 16300 will act as major support for the Nifty.
Support Bank Nifty placed near 34800
Similar to the benchmark, Bank Nifty also saw a strong gap at the open at the start of the week, but traded with a negative bias throughout the week and closed 1% lower on the weekly chart.
Bank Nifty on the daily chart faced strong resistance near its 100-day exponential moving average which is placed at 35950 levels. The Banking Index is currently trading in the 21 & 100 DEMA band and acts as a strong anchor for the index.
The momentum oscillator reads in a higher lower formation on the daily chart and has held close to 50 levels. The MACD has given a cross above its polarity line on the daily chart and the trend still indicates an upward bias.
Immediate support for Bank Nifty is placed near 34800 and below that 34500 will act as major support for Bank Nifty. Immediate resistance for the Bank Nifty is placed at 35950 levels where the 100-day exponential moving average is set.
Union Bank of India: BUY
Objective: Rs 41.10 | Stop-Loss: Rs 37
Union Bank has been consolidating for over three weeks in the range of 35-37.50 levels forming a base formation and creating an accumulation pattern. Prices saw a breakout of the consolidation range on May 30 and closed above their trendline resistance.
The RSI Momentum Oscillator (14) experienced a strong reversal from the oversold levels and has since been oscillating between the 35-45 levels. Recently, the RSI also experienced a range break above 50 levels with a positive crossover on the daily timeframe.
The MACD indicator showed an early reversal by crossing above its signal line which is below its polarity line. Prices are also held above their 21-day exponential moving average. The meter is also trading near the upper band of the Bollinger Band indicating a possible continuation of the uptrend after the recent consolidation.
Torrent Power: BUY
Objective: Rs 489 | Stop Loss: Rs 450
Price formed a smaller degree rounding out the lower formation on the daily chart and price also gave a break of trendline resistance on the daily time frame.
During the recent correction, prices took strong support near the 100-week exponential moving average which sits near 442 levels. On the daily chart, prices also closed above its 21 DEMA, which is positive for near-term prices.
The RSI Momentum Oscillator (14) showed a strong rebound on the daily chart from oversold values and has currently closed above 50 levels with a bullish crossover.
(Rohan Patil is a Technical Analyst at Bonanza Portfolio. Opinions expressed are those of the author. Please consult your financial advisor before investing.)