Tradzo Weekly Analysis
Double Bottom on Nifty failed nullified Weekly breakdown, selling pressure holds the market below 23100.
As of 10:38 IST, 21 Oct
Nifty confirmed “Double Bottom” reversal at 22150-22180 last week by crossing 22800 and closing above 23100 on Thursday, theoretical target is seen at 23600 for the double bottom pattern.
On the weekly line chart (Red dashed line) shows a weekly breakdown on closing basis, thus sustaining above 23100 is important for the rally to continue towards 23600-24000.
But breach below previous day’s low and 22900 has kept the weekly breakdown still active, below 22635 the double bottom patter loses its significance and market may fall back to 22000-21700 level.
As per the candlestick pattern Nifty is still in he larger range of 24000-22000, this bounce can be seen as pullback rally.
Brent crude price has soared to $110/bbl despite US removing sanctions Russia, as West Asia crisis escalate and Ukraine remain non-compliant to Black Sea energy truce. While India is coming out as Safe Haven destination against AI bubble but excessive liquidity to keep market range bound due to global concerns and inflationary pressure to keep the market volatile.
Positive morning setup has turned red trapping the Put writers today as Nifty faced supply pressure from 23100, it has moved support level to 22500 from 23000 at start of the day. aggressive call writing is visible, suggesting market may find it hard to sustain above 23000.
Momentum Radar on weekly plot is indicating divided momentum in Nifty 50 stocks with IT stocks on the extreme right. on that daily plot a struggle between bulls & bears may keep market range bound in 22700-23200.
01 The Larger Picture (update)
The larger support zone has now shifted to 22200-21700, which is the valley low for ‘Double Top Formation’.
The energy price led inflation has started killing the global demand, lead by refined products pressuring macros, West Asia crisis is deepening and its visible in the Brent crude steadily rising to $110/barrel on the screen but still far lower than the physical crude price neat $145-165/barrel and shipping cost rising to $25-35/barrel.
Key macro risks ahead:
1. Crude and refining capacity constraints translating into inflation in downstream products; urea shortage raising food-security concerns.
2. Yen Carry Trade Unwind: BoJ is preparing for massive unwind, we saw a hint with what happened in French bond market.
3. US debt and housing stress from an unwinding of the yen carry trade.
4. AI bubble - AI may be becoming popular and genuinely successful in the right hands, but for the majority it is just new dopamine, with sky-high valuations and no signs of profits.
5. Super El-Nino in pacific may create drought kind of situation and lower rainfall, and damaging harvest and further spike in food inflation.
6. Protest and Anarchy is spreading into Europe like wildfire, can political uncertainty lead to investment uncertainty, that is something needs more observation.
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Tradzo Research
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