Technical indicators point that Nifty may attempt to take out 12,103 next week

November 02
11:28 2019

It has been a bumpy journey, especially for short-timeframe traders, but trend seen on the weekly charts suggests that the Nifty may attempt a fresh high next week, Abhinit Kulkarni, Cofounder, Tequity Investing, said in an interview with Moneycontrol’s Kshitij Anand.

Q. It was a historic week for Indian equity markets with gains of nearly 3 percent for the week ended November 1. What is your view for markets in the coming week – will Nifty hit a fresh record high or have we topped out?

A. The Nifty is exhibiting a strong uptrend on the weekly charts. If you go by simple price action, which many senior traders do, you can spot higher highs and higher lows.

What this essentially indicates is a bullish momentum. The Nifty registered its all-time high of 12,103.05 back in June 2019, and since then, the market has witnessed some major bouts of volatility.

It has been a bumpy journey, especially for short-timeframe traders. However, on weekly charts, I am bullish and the Nifty may attempt a fresh high next week.

The level of 11,985 on the Nifty could be one level of resistance that traders should watch for in the next week. If there is a reversal pattern being formed around that level, traders may book profits in their long positions.

Q. What is your view on the latest auto sales numbers which have come out for the October month? Do you think things have bottomed out for the sector and it could well turn out to be a dark horse in 2020?

A. If we see the long-term trend of monthly car sales in India, we have been below the 200,000 per month mark for the last couple of months now. Historically, this number of fewer than 200,000 cars per month was registered a couple of times in 2012, 2014 and 2016 each. Then we had this mark being breached in 2018.

This proves two things: first that the monthly sales numbers tend to jump from this level, and second, auto sales are cyclical. This time the cyclicality was accompanied by other problems such as liquidity issues post the IL&FS fallout, banks denying financing to dealers due to risk aversion, uncertainty in the minds of consumers over Bharat Stage VI and the arrival of electronic vehicles (EVs).

When a particular sector is going through so many uncertain situations at the same time, objectively identifying a bottom becomes difficult.

However, my sense is we are at the fag-end of this auto downturn and the numbers are likely to pick within the coming two quarters. Price charts have already given us a tentative bottom.

Q. The last 11 years data suggest that November usually belongs to the bears. The S&P BSE Sensex closed in the red in the last 7 out of 11 years for November? Do you think 2019 will be different or give the fact we are trading near record highs we could see selling pressure?

A. The technical setup on monthly charts for Nifty 50 is interesting. We analysed the chart using three indicators: Bollinger Bands, Bollinger Bandwidth and Stochastics oscillator.

First, on Bollinger Bands, the closing price as of November 1 is quite close to the upper Bollinger Band placed at 12,176. The percent Bollinger bandwidth comes at 85 percent. What this means is the index may attempt to touch the UBB in the coming month once.

Second, interestingly, the Bollinger bandwidth is at a multi-year low of around 16 on the monthly chart. This gives me added confirmation that Bollinger bands may expand followed by a further rally.

Third, the Stochastics oscillator is showing interesting patterns of higher lows since the bottom that was established in February 2019. These three factors make a stronger case for a bullish technical setup for the coming month.

Q. How is the November series likely to pan out for investors? What are the bright spots if we look at the October series rollover data? Stocks that are likely to be on the list of bulls and stocks which are likely to remain in the grip of the bears?

A. The rollover figures for Nifty stand at 84.09 percent for the November series. This compares well against the 6-month average of 74.87 percent.

Rollovers for Bank Nifty stand at 63.59 percent against a six-month average of 73.22 percent. Higher rollovers were witnessed in specific sectors compared to the six-month average for a couple of sectors: Auto at 95.79 percent (vs 91.95 percent), Banking & Finance at 94.82 percent vs (91.79 percent), and Consumer Products at 95.16 percent (vs 92.65 percent). Overall these figures give a sense that the bulls may retain control.


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