Looking at the last week's market mood, it is very clear that after 9% fall from the day of budget till today, one need to be very cautious and alert. Markets are likely to extent the fall further and soon get into 3600-3800 zone.Nifty future succumbed under selling pressure, registering a fall of 9.75 per cent during the week. It ended Friday at 3,993.2 points, way lower than 4,424.65 points, its close the previous week. The fall also pushed the Nifty future into a sharp discount against the spot. It, however, ended a shade above the psychological 4K-mark.
Negative news flow outweighed the positives this week. Concerns over the deficient monsoon, global recovery and declining exports were some of the negative news. While, positive news such as Infosys results, IIP numbers and inflation were ignored by the market.
What will happen next week?
- Technical support is expected to play a role next week for any pullback as the daily Relative Strength Index (RSI) at 37 is nearing the oversold zone.
- Any pullback will create more short positions in the coming week. Markets in Europe and the US closed the Friday session by forming a Doji pattern, indicating uncertainty and a possible pause before the downturn.
- For the last 5 trading sessions, the benchmark indices are making ‘lower lows’ as well as ‘lower highs’, which shows a bearish undertone. Unless indices stop making new lows everyday, the rally cannot materialise.
- For the Sensex, the 13,519 level is acting as support level which is keeping the hopes alive for bulls. The Sensex, however, closed at 13,504 and, hence, we may see fresh correction next week. The next support for the Sensex is expected to be at 12,715.
- The Nifty future may now be heading towards its next major support level at 3,650, though in between 3,800 may offers a minor support. As long as it stays below 4,200, the negative sentiment would continue. To negate the bearish sentiment, Nifty future has to climb past 4,350 level on a closing day basis. If that happens, 4,630 and 4,800 are the next key resistance levels.
- Some of the key indicators such as - the MACD, ROC and Stochastic Slow are in the oversold zone, indicating some kind of a pullback in the very near term. In order to arrest the current downturn, the index needs to cross the 4,250-level as soon as possible.
- This week, the index may face resistance around 4,195-4,255-4,315, while support around 3,810-3,750-3,690.
Trading Strategies:-
Going short on Nifty future, keeping the stop-loss at 4,200. Risk-averse traders can consider buying Nifty 4,000 put, which closed on Friday at Rs 133.50.
-JK, Senior Technical Analyst
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