Technical View - Nov 25, 2020 - Mr. Nagaraj Shetti, Technical Research Analyst, HDFC Securities
(Time Zone: Arizona, USA)
After showing sharp upmove bounce in the last few sessions, Nifty witnessed steep profit booking from the highs on Wednesday and closed the day lower by 196 points. After opening on a positive note on Wednesday, Nifty registered a new all time highs of 13145 in the early part of the session and later slipped into decline from the highs. The mid part intraday upside recovery attempt has failed and the weakness got intensified in the afternoon to later part of the session and Nifty closed near the lows. The opening upside gap has been filled completely.
A long negative candle was formed from the new highs and that has engulfed the high low range of previous two sessions. This pattern could be considered as a bearish engulfing pattern. Hence, this market action could indicate a reversal type formation at the highs and this needs to be confirmed with more weakness.
In the previous couple of occasions, the formation of bearish engulfing patterns have failed to show follow-through weakness in the market and Nifty bounced back from the lows in the subsequent sessions. Hence, follow-through market action is necessary for the short term.
Nifty on the weekly chart showed higher level sell off and the market is placed at the edge of the support of long term up trend line (connected from top to top-weekly/monthly timeframe chart) around 12850-12800 levels. If this area holds for the next 1-2 sessions, then one may expect a possibility of an upside bounce from the lower levels.
Conclusion: The sharp weakness of Wednesday could raise chances of trend reversal at the all time high of 13145 levels. A sharp follow-through weakness is going to be crucial to confirm short term top formation in the market. The Nifty sustaining at the immediate support at 12800 levels in the next 1-2 sessions could open chances of upside bounce in the market and also more upside in the near term.