Premarket analysis: 19 July 2020
Better than expected quarterly results so far
Risk on mood in global markets
Institutions covered their shorts in derivative markets
Virus spread starting to cause concern on economic recovery
Global Markets: -Sideways
US markets and European markets ended slightly in red on Friday. The are still within the consolidation range. Risk assets such as high yield bond continued to raise while emerging market assets paused and consolidated. US Dollar and Japanese rose slightly within in their consolidation range. Gold is still trading with positive bias and refusing to budge from the highs. Volatility indices commenced their downward trend after a brief pause
ASIAN Markets this morning: - Mostly in red
Asian markets opened the week moderately in red barring china which is up 1%. The Asian markets are still having positive bias although they are stuck in range bound phase for some time now. European and US index are trading in negative territory in the Asian session this morning. SGX Nifty is trading flat compared to Nifty’s futures close on Friday.
There are no significant economic data release scheduled for today.
India: -Shorts covered
FIIs and large proprietary traders covered their short position in futures and options segment on Friday. This probably caused sharp spike in the last hour of the trading on Friday. FIIs and proprietary traders together hold about 2.4% of long position in index open interest. The Cash segment did not see much volumes from DII and FIIs on net basis. Better than expected quarterly results so far from Industry heavy weights have played a role. HDFC bank’s results that was declared on Saturday was better than expectations as well. However, the forward guidance was cautious and bad loans, defaults are expected to raise in the following quarters.
How will Nifty perform today?
Market expectation on the quarterly results have turned. The institutions are not expecting negative results anymore. This has helped Nifty break out of 10850 resistance. The market is likely to slowly trend up towards 10200 in next couple of days. However incoming results are to be watched carefully for profitability trends. Market could turn negative quickly, If some heavy weights such as Reliance is to disappoint market on quarterly results.
ACC and Bombay dyeing are declaring their results today
NIFTY -Technical Bias: Positive bias
Nifty price action:
Profit booking seems to be over and short positions in derivative markets are covered. Hence there are no immediate threat of index falling sharply. Technical expectation from raising wedge pattern is that it will breakdown from the wedge and prices will go down further. However Nifty is breaking out of the raising wedge pattern. If this is a pattern failure, Nifty could go much higher.
Today I expect Nifty to trade above the Friday’s low of 10740. Higher levels may not see profit booking. However Asian markets are in slightly in red today. Therefore, market could consolidate and trade between 10740 and 11080 today. Any break down below the Friday’s 10740 will be negative
Spreads that work in a range bound markets are appropriate till index breaks below 10500 or above 11200