IGI Logo

Indian markets could open flat to mildly higher following rangebound and mixed Asian markets today, and despite gains in the US markets on Tuesday.  - HDFC Securities

U.S. stocks closed higher Tuesday, adding to the largest four-day stretch of gains since late July for both the S&P 500 index and Nasdaq Composite, with companies reporting solid third-quarter earnings despite the spread of the coronavirus delta variant and supply-chain disruptions. According to Bank of America, through the first week, 66% of companies beat Wall Street forecasts on both sales and earnings per share, which is well above the historical average of 47%. Earlier this month, stagflation was the buzzword on Wall Street. But now excessive pessimism is receding, especially after strong U.S. retail sales data on Friday.

U.S. home builders started construction on homes at a seasonally-adjusted annual rate of 1.56 million in September, a 1.6% decrease from the previous month. Brazilian assets tumbled on Tuesday, leading losses across the globe, on reports the government will breach the country’s spending cap rule to finance a new social program, hurting the fiscal position of Latin America’s largest economy.

The International Monetary Fund on Tuesday downgraded its 2021 economic growth forecast for Asia after the highly infectious Covid-19 delta variant caused a spike in cases in parts of the region. The IMF said it expects Asia’s economy to grow by 6.5% in 2021, compared with its April forecast for a 7.6% expansion.

Asian stocks climbed Wednesday, tracking a U.S. rally as a focus on corporate earnings bolstered investor sentiment. Foreign direct investment (FDI) into China in the first nine months of the year jumped 19.6% from the same period last year to 859.51 billion yuan ($134.7 billion).

Nifty snapped a 7 day winning streak, as expected, on Oct 19. Nifty closed 0.32% or 58 points lower at 18418.7. Nifty formed an engulfing bear pattern on daily charts, suggesting some more weakness in the coming days. The next support for the Nifty could come in at 18351, while a sustainable support could come in at 17944. On rises 18477-18500 could offer resistance.

Daily Technical View on Nifty

Formation of reversal pattern at the highs..

Observation: After showing lackluster type candle pattern at the swing highs on Monday, the Nifty witnessed weakness with high volatility on Tuesday and closed the day lower by 58 points. New all time high was registered at 18604 levels and the opening upside gap has been filled completely. A long negative candle was formed on the daily chart after opening higher. Technically, this pattern indicate a formation of 'bearish engulfing' type candle pattern at the swing highs. Normally, a formation bearish engulfing after a reasonable upmove are considered as a trend reversal pattern post confirmation. Hence, this weakness after trot of seven sessions upmove indicates more weakness in the coming sessions.

The theory of correlation between 10 day EMA and movement of Nifty as per daily chart seems to have confirmed again. After widening gap between 10day EMA and Nifty, the market has started to correct down from the highs, as happened in the past and is likely to slide down to the support of this moving average around 18150 levels in the short term.

Conclusion: The continues upmove of the last 7 sessions has been broken and the market has shifted into a profit booking mode. The overall negative chart pattern indicate more weakness in the next 1-2 sessions. The next lower levels to be watched are 18200-18150 (10day EMA). Any upmove from here could find resistance around 18480-18500 levels.

Nifty – Daily Timeframe chart

To Read Complete Report & Disclaimer Click Here

Please refer disclaimer at https://www.hdfcsec.com/article/disclaimer-1795

SEBI Registration number is INZ000171337

Views express by all participants are for information & academic purpose only. Kindly read disclaimer before referring below views. Click Here For Disclaimer