Market awaits for WPI numbers and Trade Deficit number for next week: Epic Research

By Mr. Mustafa Nadeem, CEO, Epic Research

Nifty forms an Inside pattern on weekly charts indicating indecisiveness and squeeze in range. A clueless and weak breadth caps the upside as the range for Nifty broadly on a higher side remains between 10900 to 10700 while with Inside range on the weekly chart it is now between 10850 to 10750.

This is a pure compression in the volatility which indicates a move is around the corner. With that, Almost all the sectoral indices saw a muted week as range compression was seen across the board. This indicates the next directional move may have direction with clear identification of leaders for the move. Also, this week it was largely a positive move by Pvt. Banks and FMCG.

Derivatives data was also mixed as it was a free lunch for option writers this week. It has been mostly the case for last three to four weeks with range play in effect. In the later sessions of the week, we have seen short built up in Call strikes of 10900 - 11000 while long is seen on Puts side in strikes of 10700 - 10800.

Nifty technically has been in a symmetric formation and it is just the time when we see an eventual breakout from this. on the higher side 10900 and 10700 on the downside is the line in the sand for bulls and bears.

The Industrial output crashed to 0.5% from 8.1% with a negative drop of -7.6%. The Cumulative industrial output was seen at 5% vs 5.6% while the Manufacturing output also dented to -0.4%. This came in post-market and we may further see its initial reaction on Monday morning. A rise in volatility is already due and this very well may be the trigger. Traders need to watch lower levels very carefully which is placed at 10700. Once taken out on the closing basis may drag us to 10520 - 10400.

In next week we will be accompanied with WPI numbers which are expected to be muted with WPI Inflation Y/Y is expected around 4.40% while Trade deficit number is also awaited. It will be important as Govt.'s aim to bring it down. It is expected to be around 14.98B (USD).

All in all, we may see Nifty having a directional bias in the coming week.

Source : Equity Bulls

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