Nifty opened the week at 10074.85, made a high of 10088.1, low of 9685.55 and closed the week at 9710.8 with a loss of 356 points 3.7%). This is the highest weekly fall since March 2016.
Last week we discussed “Breaking Friday’s low invalidate bullish action. Nifty should trade above ELB candle high (10136.3) for further upmove.” First day of the week, Nifty made higher opening but not able to sustain above Friday’s candle. On Tuesday, Nifty confirmed its bearishness by closing below Friday’s low. Last 26 days Nifty was trading above 10 day moving average. Nifty closed below 10d ema in the same time. Market made lower low and lower high formation throughout the week. Nifty made a 434 fall against 689 points upmove. So this is a bigger fall with bigger rally. Nifty took 5 week for 689 point upmove and it took only one week for 434 point fall.
Nifty closed below 50 day moving average first time since last 7 month. 50 day moving average worked as a good support in all the previous corrections in this trend. .Vix peaked above alarming 15 level for the first time since Feb 2017.
Market closed near 9700 level which is a strong support for Nifty . In the upmove 9700 acted as a strong resistance during June 2017. On 6th June Nifty made an ELB candle by touching high of 9709.3. On 22 June Nifty made another attempt and failed to move above June 6 ELB candle. On 10th July Nifty made a hammer type candle and well closed above 9700 level. As a rule strong resistance become strong support.
At the same time, 61.8%-66% retracement of July – August Rally is placed around 9700 level
Among oscillators, RSI, stochastic & KST are currently poised in oversold territory in daily chart.
This week’s correction has brought down P/E ratio of the Nifty from 25.75 to 24.8.
For bulls protecting Friday’s low of 9685.55 is crucial. If the index recovers above the channel's support line and the 50 EMA, the bulls might be back in action. If Nifty broken Friday’s low decisively, further correction can be expected. Next support is placed around 9600-9550 level. If market move below 9449 in a faster time then it can be considered as a reversal to 8 month old bull trend.
Options data for August series indicate highest Call Open Interest has shifted lower at the strike of 10000 and highest Put build-up has also shifted lower to 9500. There is a huge addition of open interest at 9800 CE strike and huge unwinding seen at 9900 PE. Thus Options data suggests a wide trading range with resistance coming in at 9800 / 10000 and support at 9500
Global financial markets are also in a correction.
In last week, FII were sellers and DII were buyers in the cash segment.
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