Finace And Stock

Tech view: Medium-term trend positive, but brace for short-term consolidation

NEW DELHI: After a spectacular rally last week, Nifty50 formed a bearish candle on Friday. On the intraday charts, it has maintained the formation of a series of lower tops, which indicates temporary weakness, analysts said.

The index opened gap down at 17,531.90, and slid to as low as 17,452.90. However, some buying at that level brought it to the day’s high at 17,557.15, before it closed at 17,532.05, down 86.10 points or 0.49 per cent. Eventually, Nifty50 ended the week nearly 2 per cent down.

“In the week gone by, Nifty faced resistance near the daily as well as the weekly upper Bollinger Band and entered a consolidation phase. It traded with a downward bias throughout the week,” said Gaurav Ratnaparkhi, Head of Technical Research, Sharekhan by BNP Paribas.

“The overall structure shows that the medium term trend continues to be positive however the index can stay in a short term consolidation over the next few sessions,” he said.

The weakness in the index was largely due to selling in bank and financial services stocks. Profit booking in realty names also did not help the cause.

“Nifty50 appears to have unfolded a fresh leg of downswing as breakdowns on the short-term charts are clearly visible. In recent corrections, Nifty50 found support at its 13-day Simple Moving Average which has been decisively broken down after today’s price action,” said Mazhar Mohammad, Founder & Chief Market Strategist at Chart View India.

He advised traders to remain neutral on the long side for time being, whereas shorting should be considered below the 17,450 level for a modest target of 17,300 level.

While the market will remain volatile in the near future, the 17,650-17,750 range would be the key resistance zone for traders while the 17,400-17,300 zone could act as a sacrosanct support for positional traders, said another analyst.

“Contrarian traders may take contra bet near the key support at the 17,300 level with a strict stop loss at 17,250. On the flip side, partial profit booking is advisable between 17,650 and 17,750 levels,” said Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities.

As the September series F&O contracts expired, India VIX, the barometer of volatility and fear, also declined sharply. The index ended down 6.48 per cent at 17.21 on Friday.

“Bank Nifty is currently trading near the important support at 36,750 and it also completed one leg of correction. Key support levels for Bank Nifty are 36,800 followed by 36,200, and the structure suggests further upside if it manages to trade above the 36,800 level,” Chouhan said.

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