Benchmark consolidates, midcaps continues their dream run: Angel Broking

Weekly Market Wrap Up by Mr. Sameet Chavan (Chief Analyst-Technical and Derivatives, Angel Broking):

"Last Friday, our markets underwent some correction and, in the process, tested a key support of 11100. Fortunately, this corrective move did not extend further as we kickstarted the week higher on Monday on the back of a cheerful mood across the globe. This was followed by a strong trading session where we witnessed some robust moves in index heavyweights as well as the broader market. During the remaining part of the week, index just trapped in a range and had extremely lethargic moves to register its highest weekly close after February 20, 2020.

Barring the first couple of days, it was once again a boring week for index specific traders. Although, the Banking, Metal and Capital Goods managed to chip in to some extent, but the real outshining space has been the mid and small cap universe. Clearly, there has been no stopping for this space and especially the way these stocks just took off in the last three weeks. When midcap rally starts, it generally creates a euphoric situation and this is clearly what we are experiencing for the past few days. Nobody knows when and where it's going to stop and at the same time, it's hard not to participate also. The overall structure remains sturdy; but we believe that sooner or later, the market is likely to witness some correction, which would be healthy in the longer run. In the last five months, forget bearish, we did not even sound cautious and used all dips to get into the market. But now looking at a few observations, we do not want to maintain similar optimism purely with the short-term view.

Last week, we had mentioned about the 78.6% retracement of the entire fall as well as the 100% 'Price Extension' of crucial swings. Nifty has marginally surpassed it and may even extend further, but even if it moves towards 11450-11500, we continue to advise booking profits in rallies. On the daily chart, we can see a small 'Rising Wedge' and 'Bearish Wolfe Wave' pattern. A move below 11250-11200 would confirm a near term reversal to undergo some price correction in coming days. As far as the NIFTY MIDCAP 50 index is concerned, although it has surpassed the weekly '200-SMA' marginally, we advise taking some money off the table now and aggressive bets should ideally be avoided overnight. Adding to all this, we would like to draw attention towards an important development in 'US DOLLAR INDEX'. We have seen massive correction in this over the past few months, which has triggered some gravity defying moves in equity markets; but now this index seems to have rebounded from key supports along with the 'Positive Divergence' in RSI. Hence, further pullback in the DOLLAR index can lead to some corrective moves going forward. By mentioning all these points, we do not expect a complete reversal, rather such intermediate correction is considered a healthy development and provides better opportunities for those who have missed the bus in the last few months."

Source : Equity Bulls

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