Weekly Outlook: Sideways price action strategy remains sell on rise by Lovelesh Sharma, Consultant SAS Online - a deep discount broker
Below the Quote on Weekly Outlook: Sideways price action strategy remains sell on rise by Lovelesh Sharma, Consultant SAS Online - a deep discount broker
Nifty
Bears further grip the Nifty and broader market as we trend lower towards 23000. Nifty tested the 20 MA on weekly scale and sharply decline to close tad above 50 SMA. The Breadth data points to further weakness while the Santa-Claus rally has turned in favour of bears. Almost four weeks of gains wiped out this week as a bearish engulfing pattern after recent run up indicates further bearish momentum
The breadth Data points to a weaker sentiment and market internals with more than 77% of stocks in Nifty500 below short term 20 MA and around 67% of stocks within same universe trade below 50 MA. All in all, more than one-third of market is below short and mid term MA. Add to that, Net new high indicator has turned negative after weeks and it points to further weakening.
The momentum reading points to oversold zone of 16.48 as we went from 70 to below 30 in a matter of 5 days while the ADX continues to above 20, sloping higher and minus DMI leading at 39.94, a reading we haven’t seen since Election Day price action. This indicates two points; one we are in expanded price action and we are in oversold zones. So, a sideways price action may follow and will not be a surprise but the strategy remains sell on rise.
The support for Nifty is at 23350, its recent swing bottom and more importantly below that 23050, a price zone which was the main trigger point for last bullish trend.
OI points to heavy CE writing at 23800 – 24000 while fresh addition is at 23000 on PE front.
BankNifty
BankNifty similarly is in formation of a head and shoulder and its right shoulder has neckline support at 49800 – 50100. Overall expanded move and volatility may follow up with some consolidation but strategy remains sell on rise with Upside resistances at 51400 -51900. The support for banknifty on immediate levels is at 50500 – 50600. Below this, we may test long standing horizontal support of 49900 – 50000. Why the consolidation? Well post expansion that is what we expect since RSI is also extremely oversold at 13.28 and Negative DMI at 40.50 with ADX sloping higher at 22.34. We suggest to use the resistances shared above to take a directional decision.
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