Last week, we had gone with an initial target of 22700, and while there was a spike to 22619, it turned out to be brief, and we will start the week, acknowledging 22530 as a crucial challenge to clear before embarking on a the 22700-23200 run.
Intense volatility was witnessed midweek, at a level usually not seen around weekly expiry. This contrasted sharply against muted swings and range trading seen in the last two weeks of March. There was hardly any major uptick in VIX either to prepare traders towards this.
On hindsight, this was to be expected, being in the vicinity of record peak. The low vix ensured that declines did not expand into a full fledged collapse, and despite seeing lower lows for three successive days, bargain hunting was very visible. And yet, momentum went missing on every attempt to push beyond record peak.
Rejection trades dominated such trades, but all these struggles are probably painting the last few details of a cup and handle pattern, which should ideal lead to a powerful upside breakout. Meanwhile, mid and small caps were bubbling and surging forward in stark contrast, leading the recovery in broad market.
As opposed to more than 50% of stocks trading below 20day SMA a month back, only 15% and 6% of mid and small cap stocks were below this benchmark last week. This encourages us to extend our upside target to 23200.
Last week, we had gone with an initial target of 22700, and while there was a spike to 22619, it turned out to be brief, and we will start the week, acknowledging 22530 as a crucial challenge to clear before embarking on a the 22700-23200 run.
On last two occasions we had been in a similar stochastics situation, a 3-4% correction was seen, but this time around, the correction so far have evolved as part of continuation patterns encouraging us to keep pursuing upside targets.
Towards this end, downside marker is placed at 22350, below which supports are seen at 22190-22000 and 21800. Meanwhile, bank nifty has been on a much smoother upside trajectory, and has just completed the breakout of a descending broadening wedge which should ideally set an upside target of 51200, which may be played confidently as long as 47900 is intact.
First published in Financial Express
