Heading to correction or continue without it ? : Weekly Market Analysis : Aug 23 2021

 

• Weekly bearish bull trap  spinning top candle on Nifty at an all time high from where it dipped nearly 2% making inverted V movement

• Nearly 3.7% vertical fall from the top for Bank Nifty (previous week it broke the 25 week old 36000 on weekly basis)forming a wide range bearish candle.

• Latest nifty daily candle an inverted hammer candle pattern forming a potential change in polarity that may be indicating a reversal from the there while bank nifty latest candle is a spinning top but in a downtrend and at a support zone which also does not rule out bounce back.

• Nifty has the volatility expansion  while Bank nifty has the Bollinger band volatility expansion  had began slightly last week.

• Nifty made another All time high level hitting  17000 but trapping bull with a reversal from there  and taken support at momentum and previous resistance.

• The new resistance would be 16700 and 16850 and 17000 while previous resistances new support levels at 16350 and 16000-16150  levels and below that swing low levels of  15850-15950 & 15500 - 15650 could  also act as  support zone.

• Bank nifty has  resistance near 36000 and then at 36500/37700 and below supports are at 34900-34400 and 34000-33700.

• Nifty maintains the RSI momentum at bullish zones on all timeframes.Bank nifty gave up the momentum from previous week and moving towards 40 support level.

• Nifty has Bullish momentum reverse divergences seen but not confirmed.

• Nifty ADX trend indicator trend is bullish and rising and with strength  also rising  up on daily and  maintain  the trend bullishness on weekly and monthly timeframes.

• Bank nifty ADX trend indicator crossed over once again to bearish zones with not rising strength  while weekly and monthly also maintain the bullish trend.

• Open interest data for Nifty & Bank nifty showing a long  unwinding based on the futures contracts.

• Highest options call writing for Aug expiry is seen at 16500 with 16600 also seen having more writing while 15500  levels shows highest support point for nifty with 16000 support is close by.

• Bank-nifty options open interest data shows highest call writing at 36000 and 37000 levels while highest put writing also seen at 35000 and 34000  levels that could act as support for the expiry

• Put call ratio for nifty accordingly is seen 1.07 which is bullish while 0.66  for bank-nifty is  not bullish.

• India VIX  rose up nearly 8.5%  and settle at 14 and seems  to be trying to break out of the low levels zones.

• The Nifty IV 13.3 is above HIV 8.8  and  IVP remaining 13.9  levels which is at the low volatility regime. 

• IT sector index moved up ~3.5% last week and the bearish divergence seen weekly can not be negated yet.Therefore need slightly caution even though it is bullish.Dollar strength and work from home model could be behind this vertical bullishness.

• FMCG did big breakout last week from the W pattern it was attempting for some time and moved up  ~4.5%  last week after an uncertainty candle previous week. there is a momentum bearish divergence on weekly  and therefore need cautiously wait for the momentum catch up again.

• Metal went bearish following a bearish divergence on weekly timeframe but it now has unconfirmed bullish reverse divergence of momentum and could take the current momentum support and bounce up and daily is at 40 support and therefore it is at a make or break point where any further fall could turn index to bearishness confirmed.

• Auto sector fall 3.45% last week bearish and continue moving down toward double top neckline on weekly and is clear bearish momentum on short term.

• Pharma sector fall more than 4% and  gone into bearishness last week  again with a bearish wide candle. Weekly lost momentum on weekly and moved to sideways.

• Last week FII sold > 4300 cr in cash.

• DII bought 160  cr last week

• The net longs on derivatives of FII/DII stayed flat last week.

• US markets fell and recovered closed   green weekly on all major indices.

• Dollar Index strengthened and broke major resistance on weekly W pattern.

• Crude Oil fall more than 8% from top to settled near  64.4 for the week which could be positive for economy.

•  USD-INR currency pair closed green  and continue consolidating at previous support zone.

•  Gold closed green above previous recovery hammer and formed indecisive doji at major support zone could continue bullishness heading to the channel top but with slow momentum.

• India VIX continue at  low 14 levels and any spike could benefit vega positive strategies on options like double calendar.

• Therefore Index calendar spreads hedged is always bad idea for coming week due to v shape moves often.

• Markets made an all time high level last week and then reversed( V shape) with banking index doing a vertically fall nearly 3.7%  from top causing fear of an upcoming correction. 

• Overall bias turned slightly bearish due to above fall and FII selling all days of last week .However  momentum bullishness and divergence, and trend and support levels of nifty still show no signs of any corrections yet although it is clear that unless bank nifty turns bullish nifty cannot further move up.

• India vix rose up and hit 14 levels and indicating it probably is trying to be outside the lower levels. Lower IV and Vix spikes continue difficult for non directional option traders. intraday spike that occur and V shapes are frequent making intraday trading also not easy.

• Positional long trades could remain long till the support levels are indicated earlier are taken away.