21 Aug 2017

RETAIL RESEARCH
Weekly Technical Report

Weekly Technical Report

A chart speaks one thousand words

“Hold Shorts”

Technical Research Analyst: Gajendra Prabu

E-Mail: (gajendra.prabu@hdfcsec.com)

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Nifty [CMP-9710.80]

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Observations: [Earlier Indications are in Italics & All levels are in Nifty Spot/Cash]
(#Nifty Positional Recommendation (Open Position): Shorted @ 9880, Do Average at 9965 – Maintain SL 10090 (Close) – Target 9280 – 9015.)

 Week’s action formed a bearish Harami pattern which is a bearish reversal pattern; on a fall below 9752 the pattern will get validated.

 In line with our expectations, index has provided a relief rally to the retracement levels of the last falling leg and turned down from the resistance levels. [Index is
finding support at the minor trendline which could provide some support to bulls and may lead to relief rally till 9840 – 9880. Overall index has begun the awaited
larger downward retracement leg of the last major rise started from 7893 to 10137 and the downside targets are placed at 9280 – 9015 which are 38.2% and 50%
retracement levels. Maintain negative stance any rise to 9840 – 9880 could be used as shorting opportunity]

 The earlier said upward retracement lasted for 3 days which is a Fibonacci number and a new falling leg has begun from 4th day with a down gap. On Monday or
Tuesday index may attempt to cover the downgap between 9865 to 9883 level.

 As of now we don’t have idea whether index could move above 9948 or maintain this level as lower top. If it maintains as lower top then the prevailing minor degree
lower top and lower bottom structure (Bearish Continuation formation) could become major degree lower top and lower bottom structure.

 Although the index may not move above 9948, but we have a small existing doubt about current falling structure i.e. the recent fall from 10137 to 9685 has three legs
which could be either 1-2-3 or a-b-c. If it develops as five legs then the minor counter trend upward retracement from 9685 to 9948 levels could marked as “wave 4”
and now we are in “wave 5” which will slide below 9685. In case if it is a-b-c- then the upward retracement still in progress and move could retrace above 9965.
However in either case more downside room is left for bears to capture.

 We have already discussed that there won’t be any significant correction in the market without Banking Sector participation. As of now Bank Nifty is in favor of bears,
last week it has breached the base trendline and is finding resistance at the earlier broken base trendline. (See page no 5)

 In bigger picture, medium term downtrend is in progress and the downtrend could develop for next 3-4 months as the previous major corrective leg i.e. “wave ii/b”
also developed for about 4 months.

 Overall index is in progress larger downward retracement leg of the last major rise started from 7893 to 10137 and the downside targets are remains at 9280 – 9015
which are 38.2% and 50% retracement levels. Maintain negative stance and hold the shorts if any rise 9965 use it as averaging shorting opportunity.

 As per our preferred wave count: Cycle degree “wave i” has started from 4531 level and ended at 6229. The “wave ii” has started from 6229 and ended at 5118. The
dynamic “wave iii” has started from 5118 and ended at 9119 with a couple of extensions. The larger fall from 9119 to 6825 was cycle degree “wave iv” down. Now we
are in cycle degree “wave v” which has tested our medium term target of 10000 Mark (We have been mentioning this target from Feb 04, 2017). The rise from 6825 to
8968 has five wave advance marked as major “wave i/a”, its internals can labeled as a/1-b/2-c/c-d/4-e/5. The fall from 8968 to 7893 was double combination marked
as major “wave ii/b”, its internals a-b-c-x-a-b-c. The current rise from 7893 to current level is marked as major “wave iii/c” which has ended and “wave iv/d” down in
progress towards 9280 - 9015. The last rise i.e. “wave v/e” can move above top of “wave iii/c” (10137) or it can fail also so we are not highlighting the last rise.
Overall the cycle degree “wave v” not ended and it has two more uncompleted legs.

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Nifty – Internals

 The daily chart of Nifty shows internal

count structure.

 The short term trendline has

provided support to bulls and pushed
the index up to key retracement
levels.

 Finally a relief rally has taken place

for 3 days post which the index
turned down showing weakness from
the 61.8% retracement level.

 Extreme internals of current fall as

follows: fall from 10137 to 9685 has
three legs. 1st fall from 10137 to 9988
and 2nd rise from 9988 to 10088 and
the last fall from 10088 to 9685
levels. This can be either 1-2-3 or a-b-
c.

 And recent rise from 9685 to 9948

could be “wave 4” or “wave a of b”.
And now we are in “wave 5” down or
“wave b of b”.

 In simple terms, either index could

fall towards 9685 without moving
above 9948 or else index could rise
towards 9965 and then it will fall
towards 9685 levels.

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Bank Nifty – Base Trendline

 The daily chart of BankNifty shows

last rise’s internal count structure and
base trendline.

 BankNifty has broken the base

trendline a week before and last
week’s rise has halted at the same
trendline which is called change of
polarity.

 The change of polarity concept widely

used for horizontal support and
resistance levels but we can use it for
running support and resistance also.

 As per change of polarity, BankNifty is

in favor of bears.

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