Tech View: Bloodbath on D-St! Should traders go short on Monday?

The US Fed kept equity and currency markets on edge. The S&P BSE Sensex fell over 1,000 points, while the Nifty 50 broke below a crucial support at 17,400 and briefly slipped below the 50-DMA, but then bounced back.

The short term moving average of Nifty 50 is at 17,315. The index finally closed down 302 points at 17,327 after taking support from 50-DMA. It hit a low of 17,291.

Nifty 50 formed a long bearish candle on the daily chart. The Supertrend indicator also started selling on Friday.

A rise in US bond yields and selling by foreign institutional investors weighed on the sentiment. FIIs were net sellers of over Rs 2,500 crore in the cash segment of the Indian equity markets on Thursday.

“Rise in US 10-year bond yields and a strong dollar index influenced FIIs to flee emerging markets. Collapse in liquidity in the banking system, a weak currency and a current premium valuation have buoyed the market outlook for the near-term. Put into recession, Vinod Nair, Head of Research

Told.

short time to go?
Nifty has turned negative on a year-on-year (YTD) basis, and as long as it trades below the level of 17,700 – the outlook is likely to remain negative in the short term.

Experts suggest that traders can go short on the index for a possible target of 17,100 level in the coming week.

“After showing resilience for quite some time, the market is finally seeing pressure, and signs are pointing to further downside. Nifty index has the next important support in 17,100 sectors,” said Ajit Mishra, VP – Research,

Broking said.

“Since most of the sectors are trading in tandem with the benchmark, it is prudent to hold short positions as well. On the other hand, investors should use this stage to accumulate quality shares in a staggered manner,” he said.

On the technical front, Nifty has been trading with lower high and lower low formation since last four trading sessions. Selling pressure will increase in the coming week below Friday’s support of 17,291, which is likely to be volatile.

“Options data suggests a broad trading range between the 17,200 to 18,200 zones, while the immediate range is between the 17,500 to 18,000 zones,” Chandan said.

Vice President, Analyst-Derivatives, said.

India VIX was down 2.61% from 19.32 at 18.81 level. On the options front, the maximum call OI is placed at 18,000 and then at 18,500 strike, while the maximum put OI is placed at 17,500, then at 17,000 strike.

“Nifty formed a bearish candle on the daily chart and is trading below the 21-DMA, which adds to the bearishness in the prices. Nifty has given a breakdown to the horizontal line and has given a closing below the same, which leads to bearish prices,” said Palak Kothari, Senior Technical Analyst, Choice Broking.

“Support for Nifty has shifted towards the level of 17,150, while the uptrend 17,700 may act as an immediate hurdle. On the other hand, Bank Nifty has support at 39,000 level while resistance at 40,800 level,” Kothari said.

“Overall, Nifty is looking weak on the charts which may test the level of 17,150 in the coming week while closing above 17700 may show an upward rally. It is advisable to sell on Rising for the upcoming season,” she advises.

(Disclaimer: Recommendations, suggestions, views and opinions given by experts are their own. They do not represent the views of The Economic Times)

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