Nifty may see more weakness in near term; here’s what to expect

March 18, 2020 5:56 PM

The sharp down trended move continued in the market for the third consecutive session on Wednesday and Nifty witnessed a steep decline of 498 points.

The formation of historical long bull candle and also a bullish piercing line candle pattern has been negated.
  • By Nagaraj Shetti

The sharp down trended move continued in the market for the third consecutive session on Wednesday and Nifty witnessed a steep decline of 498 points. A long bear candle was formed on Wednesday (within a high low range of 720 points) and Nifty closed below the crucial swing low of 8555. This is a negative indication. The positive sentiment of last Friday’s (13th March) sharp upside bounce has been nullified on Wednesday. The formation of historical long bull candle and also a bullish piercing line candle pattern has been negated.

Normally, such negation of positive candlestick patterns more often leads to further acceleration of down trend. At the same time, we observe a formation of positive divergence pattern in daily Nifty/RSI. This positive divergence pattern needs to be confirmed with uptick in the RSI and also in the underlying Nifty, before acting positively on this pattern.

Presently, Nifty has been in a sharp trended decline and one day upside bounces have been negated so far now. Hence, any upside bounce attempt from lows could encounter sell on rise in the coming sessions.

The short term trend of Nifty continues to be negative. The negation of Friday’s (13th March) positive pattern could indicate a possibility of more weakness in the near term.
Having declined sharply in the short term, there is a probability of an upside bounce from the lows (around 8300-8200). Hence, any upside bounce could be a sell on rise opportunity in the near term. The next downside levels to be watched around 7900 levels (swing low of Dec 2016), in the coming week.

(The author is a technical analyst at HDFC Securities. The views expressed are the author’s own)

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