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Daily Technical View on Nifty

Market: Observation

• Markets ended on a flat note on Wednesday. Nifty finally gained 4.8 points or 0.02% to close at 19,347.45. Broad market indices like the BSE Mid Cap and Small Cap indices gained more, thereby out performing the Sensex/Nifty. Market breadth was positive on the BSE/NSE.

Nifty: Breakout fizzles out

• Zooming into 15 min chart, we observe that in the morning session, Nifty broke out of the trading range of the previous two sessions. But in the afternoon session, selling once again resumed and pulled the index lower to close near the lows of the day. The morning breakout thus fizzled out. The index is now trading near the crucial supports of 19249-19229.

Nifty: Daily chart still indicates a downtrend

• On the daily chart, we can observe that after gradually moving higher from the 50 day SMA last week, Nifty has reacted sharply from the 20 day SMA and is now trading below the 20 and 50 day SMA.

• Combined with the fact that the short term trend remains down, this indicates a cautious approach is warranted for the near term. A bigger correction is likely once the immediate supports of 19249-19229 are broken.

• In terms of strategy, we recommend a go slow approach with respect to fresh long positions till we see signs of sustainable strength.

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