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Market Commentary
Technical View - Oct 26, 2020 - Mr. Nagaraj Shetti, Technical Research Analyst, HDFC Securities
Posted On : 2020-10-26 17:07:49( TIMEZONE : IST )
After showing a range bound action in the last 4-5 sessions, Nifty slipped into a sharp weakness on Monday and closed the day lower by 162 points. After opening on a slightly positive note, Nifty moved into a usual range in the early part of the session. The sharp downside momentum got triggered in the mid part and Nifty showed weakness in the later half and finally closed the day with minor upside recovery.
A long bear candle was formed with minor lower shadow. Technically, this pattern reiterate a presence of key overhead resistance around 12000 mark, but the market has managed to close above the immediate support of 20 period EMA at 11736.
The formation of long range negative candles have failed to show sharp follow-through weakness in the market in recent times. After the formation of long bear candle on 15th Oct, the market has witnessed a meaningful upside bounce for the next four sessions, before declining from the highs. The high of bearish engulfing pattern remains intact at 12025 levels.
Hence, the formation of long range bear candle of Monday is expected to bring bulls back into action from current levels or from the lows as happened in the past. The important lower support is placed around 11650-11600 levels (intermediate trend line-weekly chart).
Nifty on the weekly chart is still placed within a broader high low range of 12025-11660 and we observe a formation of small bull and bear candles above the support area of 11650 (significant trend line support as per the concept of change in polarity, after breaking above it recently - weekly chart).
Conclusion: The short term trend of Nifty seems to have reversed from the highs, but the near term trend status of the market remains range bound around 12000-11650 levels. The sharp follow-through weakness is not expected from here in the short term, but there is a possibility of an upside bounce emerging from here or from slightly lower levels. The crucial lower support is placed around 11650-11600 levels.
