Any temporary cool-off towards 11,400 should be used as an incremental buying opportunity, paving the way for the next leg of upmove, says Dharmesh Shah of ICICI Direct.com

The Nifty on the weekly chart has formed the strongest bull candle since November 2018, signifying acceleration in the upward momentum as it surpassed our earmarked target of 11,400, supported by strong market breadth and above average volumes.

The index continued with its positive momentum during the current week and formed a high of 11,556 on March 20.

Going forward, we expect the bias to remain positive as long as the index maintains a higher low formation on the daily chart.

The Nifty has rallied more than 950-points over the past four weeks, leading the daily stochastic oscillator to hover in the overbought trajectory (at 86),
suggesting the possibility of a temporary breather cannot be ruled out.

Going forward, we expect the index to consolidate in the broader range of 11,600–11,400, amid stock specific action, which will make the market
healthier.

Hence, any temporary cool-off towards 11,400 should be used as an incremental buying opportunity, paving the way for the next leg of upmove.

On expected lines, the Nifty Midcap and Smallcap indices extended gains over four consecutive weeks, leading to the faster pace of retracement of the last leg of decline, denoting a structural turnaround, boding well for the next leg of the upmove.

We view the breather in the last six sessions as a secondary phase of consolidation and an integral part of the primary uptrend.

Thus, corrective declines should be capitalised on as an incremental buying opportunity given that the broader structure remains positive. Correspondingly, both indices have maintained the rhythm of not correcting for more than 14 months each since inception.

Also, the Nifty Midcap index has bounced from its 200-week Exponential Moving Average (EMA), which makes us believe that both indices have approached maturity of their price-wise, time-wise correction.

source: moneycontrol.com