Mr. Mustafa Nadeem, CEO Epic Research
Nifty ends down for the fourth consecutive week making it a monthly loss as bears control the trend. Nifty ended below 11K market after almost a brief period of 3 months shredding 7% in just a month. A correction that has shaken the medium term trend.
Technically, There are multiple factors that in place right now and further implicates the weakness on charts. Nifty has breached the crucial medium-term support trendline that was placed from troughs of previous swing bottom at 9950. Secondly, Nifty has closed below its 100 Days Moving average which is another bearish sentiment in the medium term. If Nifty continues to remain below 100 DMA at 11040 then a weakness in price will lead to a selling pressure that can amass to lower levels of 10700 - 10650.
On higher Timeframe, Monthly Chart; as the month ended, Nifty has made a bearish engulfing pattern which is a bearish signal for coming days. Study of the same pattern on Nifty on this timeframe previously has caused a major correction that was about 5% to 15%.
Both above things pointed out makes us cautious in Mid-Short term as any bounce back now will be seen as a selling opportunity.
RBI's Interest rate decision will be crucially watched given the rise in trade war has escalated and Rupee continues to fall. The GDP projection and comments will be watched as there may be some intervention by RBI that may come to give some support. Crude oil has been positive and trading above $80 mark which is another whammy for investors sentiment. A higher crude oil price has a direct impact on the Indian economy and its CAD.
On leading Indicator such as RSI, 15, a Bearish divergence is also seen as despite a bullish move in the last couple of months, Indicator points it to be a weaker top and we may see further weakness coming in. Volume has been higher amid selling pressure and rollover has been lower than last few months average on Nifty indicates an overall fragile state of price and cautiousness should be adhered to.
Upside resistance comes at 11171 - 11110 while downside support is at 10700 while below that weakness can be seen to 10060. These are for medium-term perspective. In short term, Nifty may be ranging between 11200 to 10700 while Sell on the advances is the strategy that should be used.