Technical View - Oct 18, 2021 - Mr. Nagaraj Shetti, Technical Research Analyst, HDFC Securities
2021-10-18 22:30:55 (Time Zone: IST)
The upmove continued for the 7th consecutive sessions on Monday and Nifty closed the day higher by 138 points amidst minor volatility. After opening on an upside gap of 162 points, the market shifted into a narrow range for better part of the session. Minor intraday weakness triggered from the new highs in the afternoon to later part of the session. New all time high was registered at 18543 levels.
A small negative candle was formed at the swing highs with minor upper and lower shadows. Technically, this pattern signal a formation of 'spinning top' type candle pattern. More often, such spinning tops are associated with top reversals. Hence, trading long positions needs to be protected with appropriate stoploss.
We observe three back to back opening upside gap on the daily chart which remains unfilled. Normally, the short term direction of the market more often reverse after such formation of three unfilled gaps. The movement of Nifty and 10 day EMA has been correlating in the last 64-64 sessions. Whenever, the gaps between Nifty and 10d EMA has widened, we have seen minor weakness in the underlying from the highs to reduce the gaps and Nifty to reach the support of moving average, as per daily timeframe chart.
Having widen the same gap between Nifty and 10d EMA now, the odds of another round of downward correction from the highs is likely in the short term. Hence, the upper area of 18550-18600 could be a crucial overhead resistance for coming sessions.
Conclusion: The short term trend of Nifty remains positive. The overall chart pattern calls for caution for long positions and there is a possibility of another round of short term weakness from the higher levels. The expected weakness could be a buy in dips opportunity for the near term. A sustainable move above 18650 is likely to nullify this negative indication. Immediate support is placed at 18350 levels.