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Indian markets could open sharply flat to mildly higher in line with largely positive Asian markets today and despite negative US markets on Thursday- HDFC Securities

U.S. stocks finished lower across the board Thursday, with the Nasdaq Composite giving up a modest bounce in the final minutes of trade as rising Treasury yields and a techled rout weighed on Wall Street.

The Institute for Supply Management said its US services index dropped to 62% last month from a record 69.1% in November. Data showed first-time jobless claims rose slightly last week to 207,000, but remained near a 52- week low. Claims rose from a revised 200,000 in the previous week. The yield on the US 10-year Treasury was 1.733% on Thursday, rising about 24 basis points so far in the new year.

Asian stocks were mixed Friday as investor focus turned to upcoming data from the American labor market. Investors continue to assess the impact of a potentially faster-thanexpected policy tightening by the U.S. Federal Reserve.

Nifty closed lower after a four day winning streak on Jan 06 pulled lower by weak global cues. At close Nifty was down 1.0% or 179.4 points at 17745.9. Nifty fell as expected after a strong four day upmove. However the advance decline ratio is still at 1:1 suggesting broad market strength amidst selling in index heavyweights. Local traders are accumulating mid and smallcap stocks ahead of the Union budget and Corporate results for Q3FY22. 17828 will now be a resistance for the Nifty in the near term while 17640 will be a support.

Daily Technical View on Nifty

Minor trend reversal on the downside..

Observation: After showing an excellent upmove in the last four sessions, Nifty encountered profit booking on Thursday and closed the day lower by 179 points amidst high volatility. The opening downside gap remains unfilled.

A small negative candle was formed on the daily chart with upper and lower shadow. Technically this pattern indicate minor trend reversal on the downside with high volatility. This action in the underlying considered as a high wave type candle formation. Normally, high waves after an upmove or down move could indicate trend reversal post confirmation. Hence, there is a hopes for bulls to make a comeback from the lows

After a display of strong upside momentum and the negation of bearish chart pattern of lower tops and bottoms on the daily chart recently, the Nifty seems to have unfolded a bullish pattern of smaller highs and lows as per daily timeframe chart. As per this pattern, the sharp decline from here is not expected and the buying is likely to emerge from the lower levels post minor dip in the market.

Conclusion: Four sessions of bull run has been halted on Thursday with sizable downward correction. The chances of sharp downward reversal as we had seen in the past is ruled out in the short term. One may expect minor weakness or consolidation type movement with high volatility in the next couple of sessions before showing upside bounce from the lows. Important lower supports to be watched around 17600-17550 levels.

Nifty – Daily Timeframe chart

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