Nifty settled the first trading day of the week in red, tracking mixed Asian market and marginal losses registered by US Markets on Friday ahead of speech from Fed chair Janet Yellen due on this week in its annual monetary policy symposium regarding interest rate. Market failed to recover the early loss and remained down before closing at 8,629.15 down by 37.75 points from Friday’s close.
Nifty in its daily time series chart has formed a relatively large daily range bearish candle stick pattern. The large real body indicating market is gaining down side momentum. However we need further confirmation to get the directional bias. Going forward, the key level to watch is 8,700-8,580. The breakout of the range is going to be the key for rest of the week trading session. Market is expected to see short term correction if it breaks below the lower end of the range at 8,580. Momentum indicators is in overbought zone and signaling negative divergence, indicating a short term negative bias. On the other hand, in medium term the trend rating is still very strong as long as market remained above 8,450.
Important support is at 8,580 and only a move below this level trader should book partial profit from the existing long position and should re-enter around 8,450. Medium term uptrend is likely to resume around this level and it is very unlikely that market will drop significantly below this level. On the upside resistance around 8,700-8,750 is likely to offer short term supply.
(The author is founder and chief executive officer, CapitalVia Global Research)