NIFTY In­dex Chart Anal­y­sis

Nifty may see some short-cov­er­ing

Dalal Street Investment Journal - - TECHNICALS | EQUITY -

More than the geopo­lit­i­cal ten­sions be­tween North Ko­rea and the US, the mar­kets pan­icked due to the ver­bal slugfest be­tween Don­ald Trump and Kim Jong-un, the lat­est one be­ing North Ko­rea's al­le­ga­tion that Trump had de­clared war against the coun­try. How­ever, the ac­tual cul­prit of the free fall was an abrupt sur­gi­cal strike an­nounced by the coun­try on Myan­mar, which washed off ma­jor sup­port lev­els. Fur­ther, In­dian macroe­co­nomic num­bers pre­cip­i­tated the down­fall. The fis­cal stim­u­lus panic is in the air where the con­se­quences of de­cline in GDP growth to 5.7% in Q1FY18 still linger on in the econ­omy. Fur­ther­more, the eco­nomic growth is likely to be mov­ing at a slower pace. More­over, the fear of fis­cal deficit over­shoot­ing the tar­get for the cur­rent fi­nan­cial year is real as the deficit has in­creased to 28.5%, al­ready reach­ing 92.4% of the full year tar­get.

The pro­vi­sional add-ons to the weak­ness in the mar­kets could be ahead of Septem­ber F&O ex­piry. More­over, RBI pol­icy re­view and cor­po­rate earn­ings data are at the doorstep, which are spread­ing cau­tion in the mar­kets.

The ma­jor In­dian bench­mark Nifty started profit-book­ing on the same day it hit all-time high lev­els at 10178/10179. There­after Nifty wit­nessed cor­rec­tion for five con­sec­u­tive trad­ing ses­sions, mostly sup­ported with ris­ing vol­umes. On Septem­ber 26, Nifty hit just be­low the pre­vi­ous day’s low and re­cov­ered to close flat, which has formed a kind of dou­ble bot­tom pat­tern on the daily time frame. How­ever, the re­cov­ery was a breather and Nifty nose­dived yet again, breach­ing ma­jor sup­ports at 9785, fol­lowed by 9740.

In case Nifty at­tempts short cov­er­ing at the cur­rent lev­els, we hold 9820-9890 as the im­me­di­ate re­sis­tances, fol­lowed by 9945 in the form of a pull­back, which is the 50% re­trace­ment level of the down­ward rally for the Nifty. If Nifty con­tin­ues with the fall, we hold 9685 as the cru­cial sup­port.

An im­me­di­ate bounce back to all-time high lev­els or be­yond that is tough, but strong do­mes­tic cues at the start of Oc­to­ber month fol­lowed by fes­tive sea­son may bring in some op­ti­mism in the mar­kets. Hence, con­sid­er­ing the medium-term time frame, we hold 10200-10300 as the re­sis­tances, fol­lowed by 10700. On the down­side, 9685 fol­lowed by 9640 would act as cru­cial sup­port level, as be­low that level Nifty would en­ter the neg­a­tive trend on pro­vi­sional ba­sis. Nev­er­the­less, though it is a cru­cial pe­riod for traders and in­vestors, stock-spe­cific buy­ing would help. More­over, if Nifty surges to 10000-10040 and re­treats, traders would do well to rather stay away and ob­serve the move, rather than get­ting their stop losses hit be­fore a bounce.

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