SWINGTraderIndia -Monthly Big Picture September 03 2021

Nifty50 – 17,132.20, gained 8.67% last month
 
In the weekly report published on August 18, we said “Our bias would be positive as far the index holds above the 16,150–16,100 mark and then might move towards 16,800 in the coming week(s)’’. The index gained more than 1,000 points just in 20 trading days, moving from 16,000 to 17,000. The analysis of the multi-timeframe chart depicts the following.
 

 

• In August, the benchmark index Nifty50 gained more than 8% and formed a strong bullish candle with a higher-high, higher-low price structure on the monthly chart. The move last month was the fastest upside acceleration in terms of gaining points. The momentum indicator RSI on the monthly chart is trending upward and is currently placed at 77–78 levels with a positive crossover on the monthly MACD. Another observation on the monthly RSI chart is that it has reached a historic level and touched the RSI trend line connecting the high of 2008 and 2014.
• On the weekly chart, the index has had a breakout after 7–8 weeks of consolidation above 15,900–15,950 and gained almost every week in the last month. The weekly RSI has had a breakout above the downward sloping trend line and surpassed its recent peak where it was facing resistance. Another trend following the technical indicator MACD also started trending above the positive crossover after 20 weeks.
• Likewise, the benchmark index is trending in an upward sloping parallel channel (as marked in black color on a parallel channel on the daily chart) and has now approached the upper band of the channel. Further, the index is trending above all key moving averages on the daily chart and is currently placed 6% and 14.50% above its 50-DMA and 200-DMA, respectively. Apart from this, the momentum indicator RSI has had a breakout above the “point of confluence’’ as on the first trading day of August, along with a positive crossover on MACD. Thereafter, the index gained more than 1,000 points in the last month.
• Further, as per the O’Neil Methodology of market direction, the current market is in a “Confirmed Uptrend” with two 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, indicate the index is in a strong bullish trend. Further, the index may move toward 17,400–17,500 in the next few days and week(s). However, the risk-reward ratio is not justifiable from a short-term perspective. Hence, we advise investors to have a cautious approach while taking fresh positions. Although, short-term traders can follow the buy-on-dip strategy with the respective stop-loss to monetize short-term moves.

FII/ DII Activity for the Last Six Months

 

Indian Sectoral Coverage (As on September 2, 2021) – As per O’Neil Methodology

 

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

Sectoral Analysis

Bank Nifty – 36,424.60, gained 5.34% last month 
 
August was another month when this major sectoral index traded sideways in the range 34,600–36,000 and underperformed the benchmark index Nifty50. However, it has had a breakout above the trading range on the last day of August. An analysis of multi-timeframe data points indicates the following: 
 

• Although the index is trading above all key moving averages on the daily chart as well as on higher timeframe charts, it has traded in a sideways zone from June to the last day of August. It has had a breakout above consolidation range on crossing the 36,000 mark.
• The momentum indicator RSI on the monthly chart is on a positive slope after six months of consolidation, along with a positive MACD crossover and slope. However, weekly RSI is still trending in the range with a negative MACD crossover. Apart from RSI and MACD, another technical indicator ADX/DMI on the monthly chart indicates strong moves could be expected in the upcoming weeks and month(s).
• Further, relative strength study on the weekly and monthly timeframe charts suggests this sectoral index may outperform in the coming weeks and month(s).

Summary: Our bias would remain positive above the 36,000 mark. Also, this sectoral index is most probably ready to move toward the 40,500–42,000 mark in the next few weeks and month(s).
 
Nifty Metal - 5,714.60, down 0.97% last month
 
The index cooled off by 1% in August after gaining 10.63% in July. It formed a bearish candle with a long wick, indicating recovery at the lower side of 5,200–5,300 levels. Our observations on the higher timeframe charts, i.e., weekly and monthly, are:
 

• The index is trending above all its key moving averages on the multi-timeframe charts. However, in the second half of August, it formed an “Evening Star” candlestick pattern on the weekly chart.
• The slope of the momentum indicator RSI has turned negative on the monthly and weekly charts. Although it is still trending in the bullish zone on the monthly chart, it shows some weakness on the weekly timeframe chart, along with a negative crossover on weekly MACD.
• Likewise, on the daily chart, the index took support around its 50-DMA and held above it. Hence, from now on, the 50-DMA would act as a key level. Further, the daily chart indicates some kind of a sideways move in the next few weeks.

Summary: After considering and analyzing these factors, we believe the index is facing resistance near 5,800–6,000 levels. Hence, a fresh bull call can only be taken above this level. A failure to cross this level may turn the index volatile in the 5,000–6,000 range.
 
Nifty Pharma - 14,344.75, down 0.56% last month
 
The index was down approximately 0.56% last month and turned volatile after hitting an all-time high at 14,743. The market action last month has formed a high wave like candle on the monthly chart and a couple of bearish candles on the weekly chart in the second and third week of August. Additionally, we found these following technical factors on the multi-timeframe charts:
 

• The index is trending above all its key moving averages on the daily, weekly, and monthly charts. It has traded volatile in the last month and breached its 50-DMA on August 11, but again reclaimed the 50-DMA on the last day of the month.
• The momentum indicator RSI on the monthly chart is trending in the bullish zone and is currently placed at 72 with a positive bias. However, RSI on the weekly chart shows a different picture, indicating a sideways kind of move in the upcoming days and weeks, along with negative crossover on the weekly MACD.
• Further, this sectoral index has formed a small rounded-top-like pattern on the weekly chart along with a lower peak, lower trough on the daily chart. This index is facing strong resistance at the 14,700–14,800 levels.

Summary: After considering and analyzing these factors, we believe this index is trading in a secular bullish trend as viewed from a long-term perspective. However, it indicates some kind of a sideways move from a short-term perspective. Further, fresh bull calls can only be taken above the 14,700–14,800 levels. We expect sustainable trading above 14,700–14,800 may lead this index towards the 17,000 mark in the next few months.
 
Nifty Auto - 10,034, down 0.14% last month
 
The index traded sideways with a negative bias the entire month and closed flat by losing 0.14%. After hitting its recent low on August 27, it took support at its 200-EMA and recovered somewhat from there, which helped it close above the 10,000 mark on the monthly chart.
 

• This sectoral index is trading below its 21-DMA and 50-DMA. Further, it is forming a lower peak and lower trough and has breached the upward sloping trend line connecting the low of April and July on the daily chart. However, in the last week of August, it took support at the 200-EMA, i.e., 9,700–9,750, and bounced off that level.
• Apart from the daily chart, it has formed a “Doji” candle with a lower-high, lower-low price structure on the monthly chart along with a flattened RSI. Likewise, the weekly RSI is trending downward with a negative crossover on MACD.
• Recently, the index took support at the 200-EMA and was moved to a Rally Attempt on August 26 from a Correction. As of now, we are looking for a follow-through day (i.e., +1.7% gain with higher volume) to move it to a Rally from a Rally Attempt.

Summary: The index once again reclaimed the psychological mark of 10,000 and is trending above it. However, it is still not out of the woods. Hence, it must cross and hold above 10,400–10,500 mark for bullish sentiment. Fresh bull calls can only be taken above this level, as seen from a short-term perspective. From the long-term perspective, it must cross and hold above 10,800 levels. On the flip side, breaking below 9,800 could trigger negative sentiment.
 
Nifty FMCG – 39,529.70, up 9.65% last month
 
The index traded higher and in line with our expectations, as we mentioned in our special FMCG sector report dated August 18. The index gained approximately 9.65% last month and formed a large bullish candle with a higher-high, higher-low price structure on the monthly chart.

• The index is trending above all its key moving averages on all timeframe charts. It is currently placed 6.34% and 12.94% above its 50-DMA and 200-DMA, respectively.
• The momentum indicator RSI is in a bullish trajectory on the multi-timeframe charts along with a positive MACD crossover.
• Further, this index is trading in an upward sloping parallel channel connecting the low of November 2020 and March 2021 and the high of January 2021. The index has had a breakout after eight weeks of consolidation within that upward sloping parallel channel.

Summary: This sectoral index is in a secular bullish trend and we expect sustainable trading above 40,000 levels may open a fresh upside window toward the 41,000–42,000 mark in the next few weeks.
 
Nifty Realty – 386.80, down 2.97% last month
The index saw selling pressure last month and fell 2.97%. After hitting a multi-year high at 423, it turned volatile and breached its 50-DMA. The Realty index has consolidated this month and formed a high wave-like candle on the monthly chart.
 

• Currently, this index is trading above all key moving averages and is placed 1.94% and 15.88% above its 50-DMA and 200-DMA, respectively. Further, this sectoral index is trending above the 11-year range and seems ready to outperform in the upcoming months.
• The slope of the momentum indicator RSI is trending upward in the bullish zone on the weekly and monthly charts, along with a positive MACD crossover.
• In the first week of August, it formed an “Evening Star” pattern on the weekly chart and fell toward its breakout level at 360–370.

Summary: Our bias would remain positive until the index trades above the 350–360 levels. We expect sustainable trading above 400–410 levels may lead this index toward 500–525 levels in the next few weeks and months.
 
Nifty IT – 34,570.20, up 13.42% last month
Nifty IT outperformed several Indian equities and has had a dream run rally in the last 16 months. It gained 13.42% last month and touched an all-time high at the 34,500 level.

• IT index is currently trending above all key moving averages on multi-timeframe charts. Currently, this index is trading 10.22% and 27.31% above its 50-DMA and 200-DMA, respectively.
• It formed four consecutive bullish candles on the monthly chart and is trending into a super-cycle bullish trend.
• Apart from the price structure, technical indicators like RSI, MACD, and DMI/ADX are trending in a bullish zone with a positive bias on multi-timeframe charts.

Summary: Our bias would remain positive on this sectoral index and we expect it would gradually move up from the current levels toward 35,500–36,000. However, some profit booking cannot be denied at higher levels as it has gained consecutively in the last eight weeks. Hence, we advise our subscribers to trail stop losses and remain invested in this space. Further, one can follow a buy-on-dip strategy on specific counters in this space with the respective stop loss.
 
Nifty Energy – 20,289, up 7.16% last month
 
This sectoral index moved as we expected and fell to 19,000 in the first half of August. It thereafter took support around its 100-DMA and traded sideways. Later, it bounced back sharply in the last week of August. The index has gained 9.65% and formed a bullish candle on the monthly chart.

• The index is trending above all its key moving averages on all timeframe charts. It is currently placed 3.90% and 9.32% above its 50-DMA and 200-DMA, respectively.
• The slope of the momentum indicator RSI on the monthly chart is in the flat zone with a positive MACD crossover. On the weekly chart, the slope of RSI has changed to an upward direction, but MACD is still trending below the negative crossover.
• On the weekly chart, this index is trading in an upward sloping parallel channel along with a higher-peak, higher-trough price structure. Recently, it took support at the lower band of the channel and started gaining from that level.

Summary: Our bias would remain positive on this sectoral index and we expect it to move further from its current level. The analysis of multi-timeframe charts suggests a positive bias in this space. We believe this index might move upward toward 21,000–21,500 levels in the upcoming weeks.

SWINGTrader India performance chart

 

Major Economic Events

 

Major Economic Events
EVENT DATE	DESCRIPTION
September 3, 2021	Markit Services PMI AUG
September 3, 2021	Markit Composite PMI AUG
September 3, 2021	Foreign Exchange Reserves 27/AUG
September 10, 2021	Deposit Growth YoY AUG/27
September 10, 2021	Foreign Exchange Reserves 03/SEP
September 10, 2021	Bank Loan Growth YoY AUG/27
September 10, 2021	Industrial Production YoY JUL
September 10, 2021	Manufacturing Production YoY JUL
September 13, 2021	Inflation Rate YoY AUG
September 14, 2021	WPI Fuel YoY AUG
September 14, 2021	WPI Manufacturing YoY AUG
September 14, 2021	WPI Food YoY AUG
September 14, 2021	WPI Inflation YoY AUG
September 15, 2021	Balance of Trade Final AUG
September 15, 2021	Exports Final AUG
September 15, 2021	Imports Final AUG
September 15, 2021	Passenger Vehicles Sales MoM AUG
September 24, 2021	Deposit Growth YoY SEP/10
September 24, 2021	Foreign Exchange Reserves 17/SEP
September 24, 2021	Bank Loan Growth YoY SEP/10
September 30, 2021	Infrastructure Output YoY AUG
September 30, 2021	Government Budget Value AUG
September 30, 2021	Current Account Q2
September 30, 2021	External Debt Q2