Technical View - Jan 15, 2021 - Mr. Nagaraj Shetti, Technical Research Analyst, HDFC Securities
(Time Zone: Arizona, USA)
After showing range bound action with high volatility in the last couple of sessions, Nifty shifted into a sharp weakness on Friday and closed the day lower by 161 points. Nifty opened on a positive note, slipped into further weakness in the early mid part of the session amidst a range movement. The weakness got intensified in the mid to later part of the session and Nifty finally closed with minor upside recovery note.
A long negative candle was formed with minor lower shadow. Technically, this pattern could indicate profit booking from the highs. Friday's weakness was resulted in Nifty to rest on an immediate support of 10 day EMA at 14350.
We had anticipated the chances of one day drop as per symmetrical pattern of 16-18 sessions (after the last drop of 21st Dec). Friday's sharp one day drop came after the consumption of 17 sessions post last one day drop. Previously, in many occasions Nifty witnessed upside bounces after one day sharp declines. Having declined steeply on Friday, the odds of upside bounce back is high in the market by next week.
Nifty as per weekly timeframe chart, formed a small negative candle with upper and lower shadow. Technically, this pattern could indicate a formation of doji pattern at the new all time highs (14653). Normally, a formation of doji after a reasonable upmove could signal warning for trend reversal. But, few such doji patterns have been formed in the last 9-10 weeks and the market continued its upside momentum since then.
Conclusion: The sharp decline of Friday seems to be a one day drop in the market as per the symmetrical chart pattern of daily and we expect Nifty to show upside bounce to retest the new high of 14653 in the next week. On the flip side, a sharp follow-through weakness in the next 1-2 sessions is expected to negate this pattern. Immediate support is placed at 14350.