Global market along with the domestic market tumbled with the increase probability that Federal Reserve may hike interest rate as early as in a week. As the Fed official comment that waiting too much longer to raise interest rate could be risky for the central bank. Despite couple of attempts, the stock market failed to bounce and remain under pressure throughout the entire trading session and started the first trading session of the week on negative note.
Later, market closed at the lowest point of the day at 8,746 down by 157 points from last Friday’s close. Overall, it is expected that market could move further down and a test of 8,660 which is the nearest demand zone is likely. Nifty in its daily time series chart has formed a relatively large daily range bearish candle stick which can be consider as a start of a new down swing as it has done the same with a gap.
As such the prevailing down-trend may continue going forward, if we don’t see any quick recovery above the key level of 8,845 in a days or two. Going forward key level to watch is 8,845-8,660. The breakout of the range is going to be the key for rest of the week trading session and will determine the direction of next intermediate term trend.
Momentum indicators starting to fall from its overbought zone and signaling negative divergence, we now have confirmation from the price action too. As such we expect a medium term down trend. However, long-term trend rating is still bullish as long as market remained above 8,450. Important support is at 8,710 in short term and a move below this level medium term investor should exit from the existing long position and should re-enter around 8450. Medium to long term up trend is likely to resume around this level of 8,450-8,500 and it is very unlikely that market will drop significantly below this level. On the upside resistance around 8,845 is likely to offer short-term supply.
(The author is founder and chief executive officer, CapitalVia Global Research)