Technical & Derivatives Report
On Friday, Bank Nifty started with a gap down and remained under
pressure throughout the session to end with a loss of 4.78% tad
above 34800. In our last outlook, we had mentioned the mid-week
bounce has resisted around the 78.6% retracement of the recent
fall and with Friday's massive cut the bank index has now confirmed
a lower top at the mentioned resistance as well has confirmed a
lower bottom by breaking the recent low. The bears strongly grip
the momentum, and we sense any bounce back is likely to get sold.
As far as levels are concerned, 35200 - 35590 is the immediate
resistance whereas, 34000 - 33800 is the next support to watch
out for. With a spike in volatility, traders are advised to avoid
aggressive bets and have a proper exit setup for any trades.
Support 1 – 34000 Resistance 1 – 35200
Support 2 – 33800 Resistance 2 – 35590
Exhibit 1: Nifty Daily Chart
During the last week, Markets had a nervous start on Monday as we
saw Nifty sliding below the key support of 14900 to even test sub-
14700 levels. However, at the midst of the week, we witnessed a v-
shaped recovery in the market post some dramatic events.
Everything looked hunky dory as the February series ended
convincingly above the 15000 mark. But market was not done with
its twists yet as we saw a huge gap down on Friday on the back of
weak global cues. The selling augmented as the day progressed to
eventually mark biggest single day loss in last couple of months.
The one who follows ‘Technical Analysis’, gives more weightage to
the price action and importantly it’s the closing point that matters
the most than a starting or in between activity. If we relate this
concept to the price action in the week gone by, we did see some
healthy recovery at the midst; but all this positivity eventually went
for a toss on Friday. Fortunately, we did not get carried away by the
intra-week rally and waited for the convincing move beyond 15200
to change our stance. Market failed to surpass it and in fact, with a
massive broad based sell off, Nifty has sneaked below its recent
swing low of 14635.05 on a closing basis. This led to a confirmation
of first sign of trend reversal in the form of ‘Lower Top Lower Bottom’
on the daily time frame chart. The weekly chart already showed some
exhaustion in the previous week as we observed fatigue around the
strong resistance zone of 15380 – 15500 (which is the 161% ‘Golden
Ratio’ of the entire fall from Jan’20 highs to March’20 lows).
Exhibit 2: Nifty Bank Daily Chart
Looking at the price structure, we expect this correction to extend
towards 14200 – 14000 levels first. Here, 14000 would be seen as
crucial ‘Trend Line’ support and a breach of this would open up
further space towards 13700 – 13500. Hence, we would be closely
observing how index behaves around 14000 in this week. For us, the
short term tide has turned downwards and the view will remain
intact as long as 15200 is not broken. On the immediate basis,
14750 – 14920 are to be seen as stiff hurdles. Traders should not
get intimidated if all the above mentioned scenarios turn into a
reality because the larger degree uptrend is still very much intact.
Since a long time, market has not seen any major correction, so this
should only be construed as a much awaited profit booking or a
short term corrective phase which is healthy in the longer run.
Momentum traders should avoid aggressive or leveraged longs for
a while; rather use decent declines to accumulate quality
propositions with the broader view.
Support 1 – 14200 Resistance 1 – 14750
Support 2 – 14000 Resistance2 – 14920