With more than 67% of stock futures attracting long build-up in the expiry week and FIIs holding over 25% of market-wide long positions in index futures, the upcoming week is expected to be long-heavy.
With more than 67% of stock futures attracting long build-up in the expiry week, and FIIs holding more than 25% of the market-wide long positions in index futures, we are certainly going into the week, long heavy. This prompts us to take a defensive after achieving the 18660 objectives, which we had set out with last week. In order to let profits run in the face of potential rejection trades, as we come closer to the record peak for the first time in five months, it would be prudent to keep the downside marker at 18430.
Last week, though we had taken an aggressive stance with 18660 as the objective, betting on a bullish harmonic pattern not being invalidated, we did have a few scary moments early in the week. However, the closes on each successive day saw either the nearest pivots rushing in to support, or the nearest resistances being broken, confirming the bullish view. However, Nifty Bank’s indifference, despite Nifty seeing a vertical rise on Friday, which saw recent congestion resistances and nearest peaks being conquered with ease, leaves us with the need to decide on whether to see this Nifty’s outperformance and add more longs or see this as Nifty Bank’s underperformance and take a cautionary stance.
The major reason for the lag is because Nifty Bank had already reached within touching distance of the record peak a week before itself, thus rendering different trading dynamics when compared with Nifty, which, despite a stellar last week, still has more than 2% wriggle room to build up more steam, before it meets the record peak. Secondly Nifty is more of a broad-based index as opposed to a thematic Nifty Bank index, allowing Nifty to find several winners turn by turn keeping the index’s momentum up. This is precisely what happened with Nifty last week, with Adani group stocks leading the surge first, followed by RIL as well as IT and metal stocks later. Having said that Nifty bank traders are assured of a wider trading range next week, with prospects of 44600 emerging, should 44150 be conquered. Alternatively, the inability to scale this peak or direct fall below 43830 could call for 43250, but a collapse is less anticipated.
First published in Financial Express.