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Market Commentary
Technical View - Jan 18, 2021 - Mr. Nagaraj Shetti, Technical Research Analyst, HDFC Securities
Posted On : 2021-01-18 19:59:32( TIMEZONE : IST )
After showing sharp weakness on Friday, Nifty witnessed a follow-through decline on Monday and closed the day lower by 152 points. Nifty opened on a negative note, slipped into weakness in the early part of the session. It later showed intraday range movement with weak bias for some time and made an attempt to show upmove from the lows. The upside bounce attempt has failed and the weakness got intensified in the later part of the session and Nifty closed near the low.
A long negative candle was formed on the daily chart with minor lower shadow. Monday's weakness has turned out to be a back to back decline in the market for the two consecutive sessions. This follow-through weakness pattern has been formed for first time on Monday, nearly after two months (as per daily chart). Hence, one needs to be cautious about crucial trend reversal in the market.
The immediate support of 10 day EMA has been broken down at 14350 (after 18 sessions, post 21st Dec decline) and the next lower support of 20 day EMA is placed at 14124. Hence, a close below this area could change the near term trend of the Nifty and that is expected to confirm important reversal pattern at the highs.
The symmetrical pattern like 16-18 sessions of time consumption before one day drop has worked out this time by Nifty showing sharp weakness on Friday, which was exactly 18th session post 21st Dec decline. The follow-through weakness of Monday indicate possible negation of this pattern with regards to an immediate upside bounce.
Conclusion: The sharp back to back declines (Friday and Monday) seems to have changed the sentiment of the market. A move below 14125 could confirm the reversal pattern and that is likely to trigger more weakness in the short term. Any attempt of upside bounce towards 14400-14450 could run into resistance in the short term. Confirmation of reversal could open immediate downside target of 13700 for the coming weeks.