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Daily Technical View on Nifty

Market: Observation

Markets moved down further on Monday after a positive opening. Nifty finally lost 78.9 points or 0.34% to close at 23,453.8. Broad market indices like the BSE Small Cap index lost more, thereby underperforming the Sensex/Nifty. Market breadth was negative on the BSE/NSE.

Nifty: Downtrend matured

On Nifty 15 min chart, we can observe that Nifty has continued to move lower and the 20 period MA remains below the 50 period MA indicating the negative MA crossover is intact. These two MAs are however now beginning to converge indicating that the short term downtrend could reverse soon.

Nifty: Daily and Weekly chart indicates markets could bounce back soon

Daily timeframe indicates that while the Nifty has been continuously moving lower for the last 7 trading sessions after reacting from the 20 day SMA, the index is now near the 50 week SMA at 23303. The 50 week MA usually acts as a strong support, which means that downsides are now limited and Nifty could bounce back soon, at least temporarily. Momentum indicators like the 14-day RSI too are in oversold levels, which increases the probability of a bounce back. Any pullbacks could lead to the Nifty testing the resistances at 23676-23874. Bank Nifty and Fin Nifty could outperform in the near term if the markets bounce back as they are holding above some importantsupport levels.

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