The index has shed 1,310 points (-5.2%) after making a fresh high of 26,277 last week.
A bear candle was formed on the daily as well as the weekly charts. The near-term uptrend of Nifty has turned down sharply. Having placed at the supports of around 25,000, there is a hope of a minor upside bounce in the early week, which is expected to be a sell-on-rise opportunity. A decisive move below 25,000-24,950 levels could open the next downside of 24,500 in the near term. Immediate resistance to be watched around 25,300, said Nagaraj Shetti of HDFC Securities.
In the open interest (OI) data, the highest OI on the call side was observed at 25,200 and 25,300 strike prices, while on the put side, the highest OI was at 25,000 strike price.
What should traders do? Here’s what analysts said:
Jatin Gedia, SharekhanOn the daily charts, we can observe that the Nifty has been declining for the last five trading sessions and has corrected around 1,200 points form the high of 26,277. It is now approaching the support zone of 25,000 – 24,800, which coincides with the 50-day moving average and the 61.82% Fibonacci retracement level of the Aug – Sept rally. We expect the Nifty to hold on to this support and stage a counter trend pullback as the hourly momentum setup is sporting a positive divergence which indicates loss of momentum on the downside. On the upside pullback likely towards 25,500.
Rupak De, LKP Securities
The Nifty witnessed a bear attack for the second consecutive day. Sustained trades below key levels triggered a correction towards 25,000. The sentiment has turned extremely weak, with higher levels being used as selling zones. On the lower end, the next support is seen at 24,750, while on the higher end, resistance is visible at 25,300.
Rajesh Bhosale, Angel One
The market has broken below the trendline connecting the higher lows of the last two months, confirming a channel breakdown. With prices closing just at the key 50 EMA support, this has been one of the sharpest weekly drops in recent times, forming a strong bearish candle on the weekly chart, signalling more potential downside ahead. The next key support is around the September swing low of 24,750 followed by 24,500. However, traders should exercise caution with short positions, as some in-between bounces cannot be ruled out due to oversold conditions in momentum indicators on intraday charts. On the upside, Friday’s high near 25,500, which coincides with the 20 EMA and the channel breakdown level, will act as a stiff resistance, with 25,300 being the immediate resistance before that.
Praveen Dwarakanath, Hedged.in
Nifty after a dead cat bounce, at the start of the day, again fell almost 2% from the day’s high. It is however takingsupport at 25,000 levels. Another bounce can come at the present levels, which also looks to be short-lived. Nifty has closed below the Upper band of the Keltner channel, a strong signal of a further fall. All the momentum indicators are in the over-sold region, which can be a possible reason for a small bounce which is expected to be short-lived. Options writer’s data showed a significant increase in call writing and also ITM puts short covering, indicating weakness in the index to continue.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)