By Ruchit Jain
Nifty showed a fair bit of volatility last week wherein the index recovered in the first three trading sessions towards 18700, but it corrected sharply in the last two sessions and ended the week below 18300 with a weekly loss of over a percent. Nifty registered its all-time high of 18888 on 1st December when the momentum readings got into its highly overbought territory. Market usually retraces from such an overbought zone and hence we witnessed profit booking which led to a pullback upto the retracement support of 18350. The upmove from this support was restricted around 18700 which was the 61.8 percent retracement of the correction and it resumed its downmove to end the week below the support and confirm a lower top lower bottom structure.
The Bank Nifty index outperformed the benchmark and kept rallying until its readings too reached the highly overbought zone. The overbought set ups led to a sell-off on the weekly expiry day and finally, the banking index too has started its corrective phase. While Nifty has ended the week below its ‘20 DEMA’ support, it has also given a breakdown from a ‘Head and Shoulders’ pattern conforming to a reversal. The global markets have not reacted much to the recent FED event and the
Dollar Index is on the verge of breakout from a ‘Falling Wedge’ pattern. The INR has depreciated inspite of the Dollar Index still hovering at lower levels and FII’s too have unwound their long positions in index futures due to which their ‘Long Short Ratio’ has declined from 76 percent on 1 st December to below 55 percent now.
Both data, as well as chart structure, are not optimist and hence, the markets might not be in a hurry to resume their uptrend. A corrective phase to further retrace the recent upmove of 2000 points in Nifty could be seen in the near term. The support levels to watch out in Nifty will be around 18134, followed by 18070 which is the 38.2 percent retracement of the upmove from 16800 to 18888. On the flipside, 18430-18500 would be seen as an immediate resistance range to watch out on pullback moves.
(Ruchit Jain is the Lead – Research at 5paisa.com. The views expressed are the author’s own. Please consult your financial advisor before investing.)