Technical View - Oct 25, 2021 - Mr. Nagaraj Shetti, Technical Research Analyst, HDFC Securities
2021-10-25 21:22:32 (Time Zone: IST)
After showing weakness in the last four sessions, Nifty showed high volatility on Monday and closed the day higher by 10 points. After opening with an upside gap of 115 points, Nifty slipped into intraday weakness in the early part of the session. Upside recovery has emerged from a day's low of 17968 levels and the market showed intraday range movement with minor positive bias in the afternoon to later part of the session.
A small negative candle was formed with lower shadow on the daily chart, beside the similar candle of Friday. Technically, this pattern indicate a range bound action with minor upside recovery from the lows. This is not a convincing attempt by bulls to make a comeback.
The crucial lower support of 10day EMA has been broken marginally on the lower side at 18143 and the market showed upside recovery from another important support of 20 day EMA around 17980 levels. As long as this later support 20d EMA holds, there is a higher possibility of an upside bounce emerging in the market.
The positive chart pattern of higher tops and bottoms is intact on the daily chart and Monday's swing low of 17968 could be considered as a new higher bottom of the sequence. But, we need confirmation of upmove in the subsequent session to call this as a higher bottom reversal.
Conclusion: The short term trend of Nifty is range bound with minor positive bias. Having slowed down of downside momentum and placed at the crucial supports, one may expect chances of upside bounce from the lower levels. Any failure to sustain the upside bounce or a decisive move below 17950-17900 levels could extend sharp weakness for the short term. A confirmation of upside reversal by positive close could open an upside bounce in the market.