NIFTY OUTLOOK & TRADING TIPS FOR 12 MAY 2022

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Markets showed volatility but ranged before finishing lower as investors reduced positions in IT, telecom and auto stocks. The lack of new positive signs is forcing investors to dump stocks and switch to safer havens like gold etc. Investors remain cautious, although global markets are trading in the green on falling domestic investor confidence and selling by FIIs. Indices showed extreme volatility today ahead of this week's CPI and IIP data. While we saw a significant recovery in indices during afternoon trade, market breadth was very weak as several stocks in the broader market faced major selling pressure as the small-cap index lost 3%. Indian benchmark indices closed lower for the fourth straight session in which Nifty closed below 16,200. At the close, the Sensex was down 276 points to 54088 and the Nifty down 73 points to 16167. The market became volatile while awaiting the release of US inflation data for April, which is expected to cool slightly. Inflation will remain elevated but the likelihood of any major reaction is low as markets have priced it in. The key determinant of market direction would be the pace of inflation decline in response to the Fed's actions. 

Nifty gracefully rebounded from the daily low before closing with a minor loss. On the lower end, it found support at 16000 when it closed at 175 points below the daily low. On the daily chart, a large lower wick indicates buying at the lower level. On the upper end, the Nifty should move towards 16400. On the downside, support is seen at 16150/16050. Although the larger texture of the market is still on the bearish side, we could see a strong pullback rally in the near term as the markets are in an oversold territory. For traders, 16000 would act as the sacrosanct support level and above that a pullback rally is likely to continue to the 16350 -16450 levels. On the upside, move away from 16000 could amplify further weakness towards 15950 -15850. The Nifty has formed a hammer candlestick pattern on a daily chart, indicating value buying from lower levels. Additionally, Nifty has found support from the lower band on Bollinger on a four-hour chart, which is a sign of a near-term reversal on the meter. However, the momentum indicator RSI rebounded from the oversold zone and divergence was observed on an hourly chart, suggesting a rebound momentum. Bank Nifty has support at 34000 while resistance lies at 35000. The Bank Nifty index staged a smart rebound from lower levels. However, the index needs to close above the 34800 level to resume the move towards the 35500 levels. Downside support lies in the 34000 -33800 area and a break below will only result in another round of selling. Momentum oscillators are already in oversold territory and a small pullback cannot be ruled out.

Resistance: 16200, 16250, 16300

Support: 16000, 15900, 15800