Dalal Street Investment Journal - July 09, 2019

16 DALAL STREET INVESTMENT JOURNAL I JULY 8 - 21, 2019 DSIJ.in^

level and keep a bearish bias below the

11600 level. As long as Nifty is within the

range, keep a neutral stance. In case Nifty

closes above 11911-11920 level on a

weekly basis, it may move above the

prior life-time high. The targets are open

towards the 12300 level in the short term.

But in case Nifty falls below the 11765

level and if the budget does not give any

positive trigger for the market, it will lead

to breaking even the 11620 level.

Below that, it may test the 11425

level to fill the May 20 gap.

The interesting fact is that the

market in recent times is

indicating clear divergent signals.

On the positive side, market

breadth is improving since last few

days. Also, there are early signs of

funds moving from some large-

caps to quality mid-caps. That is

reflected in performance of the

indices. The Midcap and Smallcap

indices have outperformed the

benchmarks. Even some of the

beaten down sectors such as power

and realty have bounced back by

more than 3 per cent from the

oversold condition. On the negative side,

the number of stocks hitting new lows or

new 52-week lows are more even on a

positive day. As many as 700 stocks have

reached below their face value and 70 per

cent of the BSE 500 index stocks have

given negative returns in the last month.

The Nifty PE is still at a historical high

and the market is waiting for positive

earnings growth. If the disappointment

in earnings growth continues even in the

next quarter, the market may react

adversely. Any negative budget proposal

may dampen the market sentiment. In

this scenario, it is advised to stay calm till

the budget and follow the direction after

the budget.

three trading sessions away, the markets

may not give any major breakout. Post

the budget, we may see a major move in

the markets on either side. There are a lot

of signs showing that distribution is

happening in the market at every higher

level. A set of indicators are also not

giving any bullish signal as the market is

stuck in a range-bound activity. No

indicator has made a swing high or a

positive divergence as of now. The RSI is

still struggling to reach above the 55-

levels and the MACD histogram is

showing some sluggishness in the mood

of the bears. But the MACD line is still

below the signal line. If at all MACD line

is able to cross above the signal line, Nifty

may once again try to move to higher

levels. The 5-period stochastic oscillator

has reached an overbought condition.

The directional indicators +DI and +DI

are narrowed. These signals that the

current range-bound action will

continue. The market is witnessing

profit-booking on every rise and buying

support at the bottom of the range.

Maintain a positive bias above 11865

Technicals

Market awaits Union budget for direction

T

he market is at a critical

junction now as the major

trigger, the general budget, is

just three days away. Since

last two weeks, the market

was confined to a range with lacklustre

volumes. Most of the times, the market is

within the limits of 20-DMA and

50-DMA. For the past few days, 50-DMA

is working as support and 20-DMA is

acting as resistance. Since June 3, Nifty

made six lower lows and lower highs and

recovered on June 25 and made a bull

candle after two bearish candles on the

weekly chart. On June 26, Nifty closed

above the June 20 high. But it was unable

to sustain above the breakout level.

Meanwhile, Nifty retraced almost 61.

per cent of the fall from June 3 to June 19.

Even on Monday (June 1), it retested the

61.8 per cent retracement area once

again. The price action on Thursday

afternoon clearly demonstrated the

distribution. Due to June month expiry,

on June 25 and 26, huge short covering

forced Nifty to move up. This upmove has

given a price breakout with lower

volumes. The 11865-11625 levels are

acting as resistance and support in the

past two weeks. As long as these levels are

not breached, the market’s range-bound

movement will continue. As the Union

budget, the major trigger point for the

market and the economy, is just another

Roadmap for the next 15 trading sessions

Ideas Nifty Levels Action to be Initiated Probable Targets

Resistance for the medium term 11920

Trading above 11920 on the on weekly closing basis

would give further momentum to the bulls.

12110 - 12300

Support for the medium term 11765 -

Close below 11765 on the weekly chart would change

the trend and trigger a retreat.

11625 and 11425

NIFTY Index Chart Analysis

Equity