Ahead of US presidential debate following global market Nifty turned bearish and hovering around the key level of support at 8,700-8,710. Both the Asian market was mostly in red and without any strong support from European market too, domestic market extended its losses and failed to show any strength. Market breadth remained in negative territory throughout the trading session and there was not any attempt visible from the bulls to regain strength. Finally, Nifty ended the day at 8723.05, down by 108.50 points against the Friday’s close.
However it is still trading above the key support of 8,700-8,710 and we expect once should wait for break below the support zone, before come into conclusion that a mid-term downtrend has already started. The chances of a bounce back can’t be ruled out as the overall market trend is sideways and it is trading at the lower end of the channel.
Nifty in its daily time series chart has formed a relatively large range candlestick pattern with little shadow in both side. The negative candlestick pattern indicating dominance of the bears from the beginning of the trading session till the end. If we consider the trading activity of last couple of days most of the trading session market ended with the indecision type of candlestick. After this thing happen today’s pattern hinting for a beginning of a phase where we can expect markets to give directional movement going forward. As the range of the daily movement started to increase. We expect a breakout from the range of 8,710-8,850 will bring the momentum in the direction of the breakout.
Momentum indicators after the recent rangebound movement starting to fall and indicating divergence. However, we want price action to confirm the direction first before commenting this is the sign of weakness.
From medium term perspective the key support is at 8,700-8,710 level. We expect this level as important one and is likely to absorb any further selling pressure. And most likely market to hold above this level. On the upside supply is coming at 8,850, breaking of the level market will find the momentum which is lacking couple of days and will then set for moving above the recent swing high at 9000 level. Investor is advised to initiate long on a break above 8850 with a stop below 8700.
(The author is founder and chief executive officer, CapitalVia Global Research)