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SWINGTraderIndia -Monthly Big Picture July 06 2021

July 06 2021 | Reading Time: 11 minutes
In the monthly report published on June 04, we expected the ‘’index is most probably ready to move toward 15,900–16,200 levels in the upcoming weeks. We advise our subscribers to follow the buy-on-dip strategy until the index is trading above 15,200–14,900’’.
 

 
In June, the benchmark index Nifty50 moved as per our expectations and formed a small bullish candle on the monthly chart with a higher-high and higher-low price structure. The momentum indicator RSI was trading in almost flat zone and is currently placed at around 73 level, along with MACD in a positive crossover. Further, on the monthly chart it is trending in uncharted territory above all long-term key moving averages, with positive bias.
 
On the weekly chart, in the second half of May, the index has given a breakout above the downward-sloping trend line after forming a bullish flag continuation and 12 weeks of consolidation. Afterwards, it gained 1,000 points and reached 15,900 in mid-June 2021. The price structure on the weekly chart is bullish as it is consistently trending above all key moving averages, along with a higher-top and higher-bottom price structure. However, the leading momentum indica- tor RSI on the weekly time frame shows some sort of price-momentum divergence along with a flat MACD above the central line.
 
Likewise, after hitting an all-time high of 15,900, the index turned sideways and volatile on the daily chart. For the last 13 trading sessions, it has been trending in the sideways zone in the range of 15,500–15,900. Further, it is trading above all key moving averages and currently holding above its 21-DMA. Apart from price action and moving averages, the leading technical indicator 14-day RSI took support at around 54 levels and is currently trending in the bullish zone of 50–80 levels. However, the MACD and direction moving index (DMI) on the daily chart is still showing sideways to a negative bias.
 
On the derivative data front, for the monthly contracts expiring July 29, the PCR stands at 1.31. Further, monthly option data indicates maximum Call OI stands at 16,000 strikes, which are 52.62 lakh contracts, followed by 32.92 lakh contracts for 16,500 strikes. The maximum Put OI stands at 15,500 strikes, followed by 15,000, which are 65.89 lakh contracts and 59.65 lakhs contracts, respectively. Further, volatility measuring index “INDIA VIX’’ reaching 12 indicates bullish undercurrents in the overall market.
 
Further, as per the O’Neil Methodology of the market direction, the current market is in a “Confirmed Uptrend” with four distribution days in the last 25 trading sessions.
 
 
Summary
 
 
All the above-mentioned multi-timeframe technical parameters, along with derivatives data and O’Neil Methodology of market direction, suggest a bullish trend along with positive bias. We expect sustainable trading above 15,900 may lead this index toward 16,200–16,400 levels in the next few weeks. We advise our subscribers to follow the buy-on-dip strategy until the index is trading above 15,500–15,400 levels.
 
FII/ DII Activity for the Last Six Months
 
 

 
 
Indian Sectoral Coverage – As per O’Neil Methodology 
 
 

 
 
Current Status of Major Global Indices – As per O’Neil Methodology
 
 

 
 
Sectoral Analysis
 
Bank Nifty – 34,772.20, down 2.12% last month  
 
Last month, this major sectoral index traded sideways with negative bias in the range of 34,000–36,000 and underper formed the Nifty50. It has formed a bearish candle, but maintained a higher-high and higher-low price structure on the  monthly chart. Analysis of the last five weeks’ price actions indicates this key sectoral index did nothing and traded side ways as well as underperformed the market. Momentum indicator RSI on the monthly chart is still trending into the  neutral zone with a positive crossover on MACD. However, weekly MACD is still trending with a negative crossover  above the central line. 
 
The multi-timeframe analysis of Bank Nifty indicates this index is trading in a range-bound zone and, from the upcom ing month’s perspective, we expect sustainable trading above 35,600–36,000 may improve its bullish sentiment.  Sustainable trading above this level may lead it towards the 40,000 level. However, a failure to cross and hold above  35,600–36,000 may keep this index volatile for a few more week(s). 
 
Nifty IT - 29,007.95, Up 7.6% last month 
 
We mentioned in the previous monthly report that our bias would turn positive once it crosses and holds above  27,500–27,600 levels. The index gained around 7.6% in the last month and formed a bullish candle on the monthly  chart. Further, this index is moving higher and trending above all key moving averages in all time chart frames. Apart  from the price structure, technical indicators like RSI, MACD, and DMI/ADX are trending in a bullish zone with positive  bias on multi-timeframe charts. 
 
Our bias would remain positive on this sectoral index and we expect this index will slowly and gradually move toward  30,000–30,500 levels in the next few weeks.  
 
Nifty PHARMA - 14,309 Up 1.8% last month 
 
The index has traded higher and in line with our expectations, as we mentioned in our previous monthly report. The  index reversed its trend from March 2021 and started trending upward and surpassed its all resistance. It is currently in  bullish momentum on multi-timeframe charts. The momentum indicator RSI is in the bullish zone placed at 73 and  MACD is trending with a positive crossover above the central line since April 2020 on the weekly and monthly charts. 
 
Our bias would remain positive above the 14,100–14,200 mark; sustainable trading above this level may lead it toward  17,000 levels in the upcoming few months. 
 
FMCG - 36093 Up +2.41% last month 
 
This sectoral index traded almost as we expected in last month’s report published on June 04. The index gained around  2.4% in the last month and formed a bullish candle with a higher-high and higher-low price formation on the monthly  chart. It is also trending above all key moving averages on the multi-timeframe chart. The analysis of the weekly chart  indicates the index has gained each week, except in the third week of the last month, where it lost around 0.77%.  Further, a relative strength analysis of this index versus the Nifty50 suggested some sort of underperformance in the  past one year. However, there is some improvement from the last five weeks. The momentum indicator RSI as well as  MACD are trending into upward slopes with a positive crossover on monthly and weekly charts. 
 
Our bias would remain positive in this space until this index trades above 35,800; sustained trading above 36,400 may  open a fresh upside window toward 38,500 levels in the upcoming few weeks. However, bias would be negated below  the 35,800 level. 
 
Nifty Metal – 5,215.80, up 1.05% last month 
 
This sectoral index moved as per our expectations and touched its resistance high at 5,400 levels. However,  profit-booking at higher levels pushed the index down, and it closed with a 1.05% m/m gain. In the last month, it formed  a “long-legged Doji candle” along with a sideways trending RSI. Similarly, on the weekly chart, it was trading sideways  in the range of 4,850–5,400 in the last 7–8 weeks and is currently holding just above its 50-DMA. Further, it is trading  in a downward-sloping channel connecting high from May 2021 to June 2021.
 
The multi-timeframe charts indicate sustainable trading above the 5,300–5,400 mark may lead it to the 5,900–6,000  levels in the next few weeks and months. However, on the flipside, the 50-DMA, i.e., placed at 5,000–4,950 levels, will  be the key level to watch. Hence, breaking below this level may open a fresh downside window toward 4,600–4,500  levels. We therefore advise a cautious approach in this sector in the upcoming weeks. 
 
Nifty Auto - 10,600.35, up 1.03% last month  
 
This sectoral index has formed a small bullish candle with both side shadows, which indicates a sideways trend in the  last month. However, it has maintained a higher-high and higher-low price structure on the monthly chart, with RSI  trending in sideways and MACD trending positive. After touching a high at 10,900 levels, auto indices came under  selling pressure, but took support at the 50-DMA and bounced back from it. This index is trading above all its key  moving averages on a multi-timeframe chart and is currently trading 2.38% and 11.13% above its 50-DMA and  200-DMA, respectively. We expect sustainable trading above 11,000–11,100 levels may open a fresh upside window  toward the 11,800–12,200 mark in the next few weeks. However, the index’s failure to hold above its 50-DMA may turn  it volatile and choppy. Hence, the 50-DMA is a key level to watch on the downside. 
 
Nifty Realty – 343.95, up 2.32% last month  
 
Last month, the index faced resistance around the 360–365 levels and traded sideways with a negative bias. It has  formed a bullish candle with a long upper shadow; however, its price structure was bullish on the monthly chart.  Further, an analysis of weekly and daily charts suggests this index is facing resistance around 360 levels and it has  formed a double-top price pattern. However, analysis of multi-timeframe charts along with various technical indicators  suggests, sooner or later, this index will cross this resistance and, most probably, will start trending in an upward direction. This index is trading above all its key moving averages on a multi-timeframe chart and is currently trading 3.82%  and 14.37% above its 50-DMA and 200-DMA, respectively. We reiterate our opinion about the realty sector which we  published on June 24, 2021. We expect sustainable trading above 360–365 levels may lead the index toward the  440–460 mark.  
 
Nifty Energy – 19,822.40, down 0.43% last month 
 
Last month, this index lost 0.43% after reaching a new all-time high of 21,066 and formed a “shooting star” candle on  the monthly chart. It has tested almost 161.8% retracement level of its recent fall in 2020, i.e., from 16,840 to 9,750.  The momentum indicator RSI is trending sideways with a positive MACD crossover. On the weekly chart, this index is  trading in an upward-sloping parallel channel connecting the high of August 2020 to March 2021 and low of November  2020. Further, in the second week of June, it formed a “bearish belt hold pattern” and broke its 21-DMA. Currently, this  index is trading 1.45% and 12.60% above its 50-DMA and 200-DMA, respectively. 
 
The multi-timeframe analysis suggests that this index has strong resistance in the range of 19,900–20,800 in upward  territory. Further, we expect a sideways kind of move with negative bias in the upcoming few weeks in the range of  19,000–20,800. 
 
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