Weekly Outlook India Markets – 03-Nov-2019

Updated: Dec 6, 2019

Key points for the week: India Markets NIFTY, BANKNIFTY

· #NIFTY rallied above the 11600-11700 supply zone as expected.

· However, the rally happened in the beginning of the week itself rather than after option expiry as we had expected

· Bull flag identified in last week’s bulletin played well, taking the market to higher supply zone at 11910 – 11990

· #BANKNIFTY appears much weaker and exhausted

As expected in our last weekly bulletin (Weekly Outlook India Markets – 29-Oct-2019), NIFTY played the bullish flag pattern. However on the first trading day, 29th October, after Diwali, it rallied, beating expectations that it would stay in range near max pain point then at 11650. On the second day, 30th October, following Diwali, it gapped up, faded the gap and then crawled further until it reached supply zone at 11910 – 11982.

NIFTY Daily Price Chart

This supply zone where the market is now, appears very strong as it was origin of a massive breakdown that eventually led to 1400 points drop in NIFTY. Given that the accompanying BANKNIFTY which used to be a leader index earlier in the year now has become much weaker, we expect this supply zone to play in causing some correction in near future.

BANKNIFTY Daily Price Chart

BANKNIFTY, while staying significantly short of the corresponding supply zone, also appears to be testing newly formed downtrend line. If NIFTY starts correcting, we can expect BANKNIFTY to reverse, to test 28000 level.

What Next?

In the immediate future, we expect NIFTY to correct by 300 points, or even more. In the process we can expect other indices and correlated stocks to drop. Sometimes earlier we had warned that traders and investors should not fall in love with the upside. This could be an evidence that we are not fully into a long term bull market yet.

Traders, put your trades with caution.