Technical View - Jan 25, 2021 - Mr. Nagaraj Shetti, Technical Research Analyst, HDFC Securities
(Time Zone: Arizona, USA)
Nifty continued with decline for the third consecutive sessions on Monday and closed the day lower by 133 points. After opening on an upside gap of 105 points, the market slipped into intraday weakness in the early part of the session. It later made an attempt to show upside recovery from the dip and failed to sustain the highs. The weakness got intensified in the afternoon to later part of the session and Nifty closed near the lows and the opening upside gap has been filled completely.
A long bear candle was formed on Monday, which is back to back for the three consecutive sessions. The three sessions consecutive decline was formed in the market after the time span of four months. Hence, this pattern could be in-line with the reversal formation in the market at the highs. Hence, the last swing high of 14753 of 21st Jan could be a reversal high for the near term.
The immediate supports like 10 day EMA has been broken at 14450 in the last session and the Nifty is currently placed at the verge of moving below another short term support of 20 day EMA at 14260. Hence, a move below this area could open more weakness in the short term.
Nifty on the weekly chart, formed a doji and high wave type candlestick pattern back to back in the last two weeks. This market action could be considered as a beginning of major profit booking in the market from the high. The pattern formation of daily and weekly could signal chances of continuation of downward correction in the market for the coming weeks. The key economic event of Union Budget 21 is scheduled on 1st Feb, which is expected to be an event for the market. There is a higher possibility of volatility and emergence of sharp weakness post the event.
Conclusion: The short term trend of Nifty continues to be weak. The consistent decline of the last three sessions could be hinting at the possibility of reversal in the market. A sustainable move below 14200 is expected to drag Nifty down to 13800 levels in the near term. Any upside towards 14360-14400 could be a sell on rise opportunity.