*AAKASHAYA PATRA WEEKLY MARKET OVERVIEW: 22.08.2020

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Even as the Nifty faced Resistance at the Weekly Rising Trendline (Nifty 11419); there was no stopping the Mid-Cap Index (up by around 4%) and Small-Cap Index (up by around 5%). The action has clearly shifted to the small and mid-cap universe. Even as Nifty continues to climb higher, the cause of concern is the steep slope of daily Rising Trendline. The speed of increment in Nifty is lower than the increase in value of daily Rising Trendline (11233), which is an indication that a bearish breakout cannot be ruled out in the near future. Nifty continues in a Trading Range (10800-11500), the upper boundary of which is defined by the daily Bearish Gap (11384-11536) and the lower boundary by the critical 200dma. One would do well to focus on the mid-cap and small-cap stocks as that is where the percentage gains lie.

Technically Speaking :-

Sensex opened the week at 38062, made a high of 38788, low of 37734 and closed the week at 38434. Thus it closed the week with a gain of 577 points. At the same time the Nifty opened the week at 11248, made a high of 11460, low of 11144 and closed the week at 11371. Thus the Nifty closed the week with a gain of 193 points.

On the daily charts, Sensex has formed a Doji whereas Nifty has formed a Star like formation. Thus both the indices have formed a neutral formation which closely resembles a Bullish Tri-Star formation, but it cannot be considered significant as it has formed at the top of an Up Trend. On the weekly charts both the indices have formed a White body candle which is slightly smaller than a Real body candle. Thus Weekly Candlestick study suggests a Bullish bias in the near term. The indices are in a Trading Range between Sensex 36800-38800 & Nifty 10800-11500.The Upper Boundary of this Range is defined by historical Weekly Trendline (Sensex 38810 & Nifty 11419) obtained by joining the critical bottoms made in Oct 2018 & Aug 2019. Repeated failure to cross the Upper Boundary will lead the indices to test the Lower Boundary which is defined by the critical 200dma (Sensex 36814 & Nifty 10829). A break of upper boundary will lead the Nifty to Resistance offered by daily Bearish Gap at 11384-11536. A break of lower boundary defined by 200dma, can lead the indices down to test the higher bottom at Sensex 35877 & Nifty 10562.

The daily steep Trendline (Sensex 38101 and Nifty 11233) which continues to support the Market, since the start of this current upward Rally, is also a part of Rising Wedge pattern. Closing below this Trendline will complete the Bearish Rising Wedge pattern and the Targets will be at Sensex 35332 and Nifty 10341. Further Bearishness can lead to lower Targets of Sensex 33823 and Nifty 10072.Only a Close above Sensex 38788 and Nifty 11460 will negate the Bearish Pattern.

Both the indices tested and have just managed to close above the Short term average of 20dma (Sensex - 38059 and Nifty - 11220). But both the indices continue to remain above the Medium term average of 50dma (Sensex - 36748 and Nifty 10831) as well as the Long term average of 200dma (Sensex - 36814 and Nifty - 10829). Thus the Trend in the Short term Timeframe is still Upwards, whereas the Trend in the Medium term as well as Long term Timeframe also continues to be Bullish.

MACD continues in Sell mode whereas Price ROC continues in Buy mode. RSI (62) still suggests bullish momentum. Stochastic Oscillator %K (62) is below %D and hence in Sell mode. ADX (32) suggests UpTrend is now slowly losing strength. Directional Indicators continue in Buy mode as +DI continues above -DI. MFI (77) suggests Positive Money Flow. OBV continues in Buy mode.Negative Divergence of the first order observed in MACD, RSI, Stochastic Oscillator and MFI is a cause of concern. Thus Oscillators are suggesting a mixed bias.

Options data for August series indicate highest Call Open Interest at the strike of 11500. Highest Put build-up is at the strike of 11000. Thus Options data suggest a short term trading range with Resistance @ 11500 & Support @ 11000.


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