This is the fifth week consecutively that Nifty-50 has failed to form a single positive candle on the weekly charts. Post making an all-time high near the levels of 11760, the benchmark has failed to regain a positive grip on the market that it had lost somewhere in the first week of September 2018. Bearish action is evidently visible in all sectors across the board and all stocks have regressed with a varying degree in the past month and are continuing to do so. Majority of the stocks being on the over-bought zone, followed by depreciating currency and skyrocketing crude prices had created a perfect atmosphere for things to go the way they have. Owing to this, the usual question remains as to what is to be done from hereon.
The aforementioned chart depicts the EOD status of Nifty-50 index (cash) and has been picked from one of the most comprehensive and trader supportive software offered by TraderGuide. It can be observed that the last three trading sessions have particularly been horrific for traders as the index witnessed a gap-down followed by continuing bearish action without any major recovery. All technical indicators, including trend following indicators such as MACD, momentum indicators such as RSI and confirmatory indicators such as Volume are pointing in the same direction that the near-term view of the market is bearish. Even the Open Interest data suggests that heavy call writing has occurred at 10400 and 10500 strike prices, owing to which these levels will act as strong resistance as of now. A break above the aforementioned levels may bring about some positive action thereby taking it towards 10600 and above. On the downside, levels of 9950 (pivot low) and 9900 (Fibonacci Retracement Levels of 38.2%) will act as strong support levels. A break below these levels will cause further shrinkage in the index.
In short, as long as levels of 10400 followed by 10500 remain protected on the upside, the undercurrent on the Nifty-50 will remain negative. The benchmark is expected to find some support near the levels 9950-9900 post which bearish action may continue. Traders are suggested not to create any fresh long positions without the confirmation of the aforementioned levels. One must look for trader in the short side as much as possible.
- Anand Singh Gaur
- Sunil Kothari