Some recovery after testing sub-10800 levels, avoid fresh shorts: Angel Broking
Daily Market Wrap Up by Mr. Sameet Chavan (Chief Analyst-Technical and Derivatives, Angel Broking):
"The escalated issue with respect to US-China trade war is weighing down heavily on markets across the globe and we are not at all spared with this. Despite a smart recovery on Friday, we had a massive gap down opening to kick-start the new trading week. This was mainly on the back of a deep cut seen in the Dow Jones futures early in the morning. The weakness aggravated in the initial hour to even slide below the 10800 mark for the first time since February 28, 2019. Fortunately, once again index managed to recoup major portion of losses to conclude with a decent cut of over a percent.
Technically speaking, we are extremely oversold since few days and on Friday, the recovery had come from crucial Fibonacci ratios. Considering Friday's close, the set up was just perfect to have a head start and then continue to some recovery mode. But, when things go wrong, we tend to have no support from other aspects as well. Today's gap down opening poured water on all such hopes. But having said that, today's close is also a bit encouraging. We have managed to reclaim key Fibonacci ratio and the daily chart now depicts a 'Bullish Hammer' pattern. Yes, the said pattern needs to have confirmation in the form of a close above the high i.e. 10895.80 in today's case. Also, the reading on the 'RSI-Smoothened' oscillator on daily chart has reached the lowest level since October 15, 2018. Hence, since last four sessions, although markets are falling in initial trades, they are attempting to rebound as well. Probably in next couple of days, markets would give some respite towards 11000 - 11100.
Traders are advised not to create fresh short positions at current levels. Rather can look to go long on some candidates who are poised for some relief rally. In our sense, correction in 'Auto' and 'Auto Ancillary' spaces has halted for a while and we can see some short covering moves in these names."