RETAIL RESEARCH 04 Feb 2017

HSL Crystal Ball

A technical forecasting of Nifty for the month of February 2017

Nagaraj Shetti
nagarajs.shetti@hdfcsec.com
Tel-022-30750021

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Nifty Daily timeframe

Observation:
Daily Timeframe: Nifty shifted into consolidation for second consecutive session on Friday and closed the day higher by
around 06 points.

After opening with flat note today, Nifty shifted into intraday narrow range for the whole session (with in a high low range
of around 41 points). The underlying trend was choppy for the day.

A high wave type candlestick patterns have been formed in the last couple of sessions, post sharp upmove of 1st Feb (Union
Budget), which is suggesting a temporary halt in upside momentum in the last couple of sessions.

The positive sequence of higher tops and bottoms is intact in Nifty as per daily timeframe chart and present upmove could
be in line with the formation of new higher top of the sequence. But, the higher top has not been confirmed yet.

Over the last one month we observe a formation of more numbers of long bull candles on the way up and relatively small
bear candles during declines or minor corrections.

One day weakness/downward reversals have not been noticed with follow-through moves so far. This pattern is displaying
an inherent strength of upside momentum and indicates more upside for near term.

Daily 14 period RSI has turned flat around 72-73 levels and a negative divergence pattern in Nifty/RSI seems to have started
to form.

The upper area of daily RSI around 72-73 level has been important swing high for the last one year, as the RSI has turned
down sharply for many occasions from this area in past. Hence, the indications of this momentum oscillator is suggesting a
possible dip in RSI down to 65 levels (from the current reading of 73 levels). This expected pattern could mean minor
correction/consolidation for the market in the next few sessions, before showing further upmove.

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Nifty weekly timeframe

Observation:
Weekly Timeframe: After showing sharp upmove during last week, Nifty continued with follow through upmove during this
week and closed the week higher by around 1.15%, as per w-o-w basis.

A bull candle has been formed this week with long lower shadow as per weekly timeframe, which is indicating an
emergence of buying interest during intra-week dips. This is positive indication.

The important area of 8500-8550 levels (green dashed horizontal line) has come into play again during this week, as Nifty
witnessed sharp upside bounce back this intra week from near this support area.

Previously, the area of 8550-8500 levels have acted as a significant support/resistance band for the market in past and have
led to formation of long range candles (both bull and bear candles-marked in X).

Nifty showing sharp upside bounce back this week from near that support is however validating the upside breakout of the
said resistance of last week (long bull candle-later part of Jan), as per the concept of change in polarity. Hence, this is
signifying the area 8550-8500 levels-green line.

Next important resistance/target for the market could be a down sloping trend line (orange dashed line, which is
connected from the important top of 9119-March 2015). This hurdle could encountered around 8925 levels in the next 2-3
weeks.

Weekly momentum oscillator like 8 period MACD has moved up and it is now showing positive crossover signal from near
its equilibrium line (MACD line cutting above its signal line).

This is positive indication for the market as per larger timeframe, as such positive crossover signals in MACD after long
period is suggesting some more upside for the market for near term.

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Nifty monthly timeframe

Nifty Monthly timeframe

Observation:
The Jan-17 month has witnessed an excellent upside bounce back in Nifty, as the index gained by around 376 points, as per
month on month basis.

The formation of hammer type candlestick pattern as per monthly timeframe of Dec-16 month has led to a formation of
long range bull candle during this month. This is suggesting a bottom reversal pattern as per larger timeframe chart.

After the positive close during Jan-17 month, Nifty is now showing a fine follow through upmove for Feb month till now.
Internally, the sharp weakness was not seen as per intra month and buy on dips strategy has been worked out effectively
over the last 5-6 weeks.

As per monthly timeframe chart, we observe consistent formation of higher bottoms over the last 5-6 years (marked in X)
and we also observe that those bottom reversals have not been revisited later.

If the bottom reversal pattern of Dec-16 (7893 levels) is considered as one of the important bottoms we mentioned, then
we can put argument that the bottom of Dec-16 could be a significant bottom reversal and this bottom is not likely to
revisit in coming months.

Presently, Nifty is now advancing towards the important overhead resistance of down sloping trend line (green dashed
trend line, connecting the important tops of March-15 and Sept-16 respectively). This area is placed around 8925 levels for
the month of Feb-17.

This key overhead resistance is going to be a strong hurdle for the market and could possibly lead to some profit booking
from the highs for this or by next month.

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Month gone by Nifty daily timeframe

Nifty started the month of Jan-17 with the sideways consolidation movement for few sessions and this range movement
has ultimately led to an upside bounce back during early part of the month.

The upmove and sideways trend continued for some more sessions, before showing sharp one day decline on 20th Jan. This
has later turned out to be a false downside reversal and lead to a sharp upside bounce back (counter attack move) for the
next 3-4 sessions.

Yet another one day sharp drop occurred in Nifty during last trading day of Jan month resulting in close of Jan month with
minor profit booking from the highs.

Overall, the month of January 17 has witnessed a sharp up trended move, where the index rose as per the positive
structure of higher highs & higher lows and closed the month with hefty gains.

Summing Up - Forecasting for Feb 17 month:

The underlying trend of Nifty as per daily and weekly timeframe is up and the overall chart and momentum patterns are
suggesting a possibility of continuation of upmove for rest of Feb month.

Meanwhile, Nifty is now advancing towards the crucial overhead resistance of around 8925-9000 levels (important down
trend line and previous top of Sept 16), where one may expect possible halt in upside momentum. This upside levels to be
reached by the end of Feb-17 month.

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