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Sensex (47410) / Nifty (13967)

Our markets were closed on Tuesday on account of the Republic Day; but the global peers had couple of weak sessions, which we had to digest at the opening yesterday. Surprisingly, markets opened on a flat note, taking cues from the positive Dow futures yesterday morning. However, this turned out to be a formality as the selling resumed right from the word go to slide back to the negative territory. As the day progressed, indices kept on breaching all intraday supports one after another. Eventually, the Nifty concluded with almost couple of percent losses to mark close below 14000 for the first time in the new year.

The way market behaved in the previous two sessions, it was clearly a sign of weakness and we had hinted towards the possible correction from the levels of 14600 – 14750. The main reason behind this pre-emption was the 3-points ‘Negative Divergence’ at new high. This anticipation turned into a conviction after banking index confirming a ‘Double Top’ on Friday by closing below crucial swing lows.

The Nifty was yet to follow this and yesterday finally it broke important support of 14222 with some authority. It is rare to see market giving trend reversal ahead of the major event, but looking at yesterday’s close, further correction looks on cards. We continue to remain cautious and advice using bounce back to go short with a momentum perspective. For the coming session, 14100 followed by 14200 are to be seen as immediate hurdles; whereas on the flipside, 13850 – 13772 are the levels to watch out for

Since the much awaited correction has come before the event, things have become extremely tricky now. It would be difficult for both counter parties (Bulls and Bears) to carry their positions on the event day as both would find themselves stranded at the middle of the ocean.

Nifty Daily Chart

Nifty Bank Outlook - (30284)

Post a mid-week holiday, the bank index started on a flat note however the rub-off effect from the previous sessions pulled the bank index lower. For the first half it moved gradually lower however in the second half the sell-off aggravated to eventually end with a loss of around 3% at 30284.

Last week, we mentioned a double top breakdown and we have now seen a strong follow-up sell-off after that to erase more than 2500 points from the all-time high in just four sessions. The bank index has now reached a trend line support seen on the daily chart; we sense this support to be broken sooner or later however as the hourly oscillators are oversold and as its expiry day we may see some volatility around the same.

Traders are advised to avoid aggressive bets ahead of the key event and keep positions light. As far as levels are concerned, immediate support is placed around 29650 and 29446 whereas resistance is seen around 30620 and 30900 levels.

Nifty Bank Daily Chart

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