Nifty opened in Wednesday’s trading session with negative note following the weak Asian market and the US market which hovering around record high in a condition where oil prices is falling. Throughout the trading session market remained extremely volatile and traded lower before closing at 8,594.60 down by 107.95 point.
Nifty in its daily chart has formed a black marubozu candlestick pattern after a couple of indecisive candle in last couple of days. This indicates sellers maintained control of the market throughout the day. As such market sentiments turns negative and the level of 8,580 is now becomes the key for the market. Going forward staying below this level, market is likely to gain momentum in downside.
In the stochastic indicator we can see that the indicator is consistently trading into the overbought zone and flashing multiple sell signal. The distance between k% Moving average and d% Moving Average is increasing , indicating probability of market gaining downside momentum. However, this is very likely after the sharp rally it has witnessed recetly. In MACD indicator the signal line, MACD line and histogram are all trading above the zero line in its longer time series chart and indicating strong medium term up trend. As such any correction is likely to be short term and should not move significantly below the 8400 level.
Important support is at 8580 and a move below this level trader should book partial profit from the existing long position and should re-enter around 8400.On the upside resistance around 8700-8730 is likely to offer short term supply.
(The author is founder and chief executive officer, CapitalVia Global Research)