Beganwith a strong note and ended on a sharp decline. The Nifty gained 238.80 points or 0.97 per cent last week. The BSE Sensex is up by 0.88 per cent. The Nifty Midcap-100 and Smallcap-100 indices advanced by 1.99 per cent and 2.12 per cent, respectively. On the sectoral front, the Nifty Auto is the top gainer with 5.02 per cent, followed by Consumer Durable with 3.91 per cent. The Realty, FMCG, and IT sectors posted decent gains of 1.74 per cent to 3.45 per cent. The Bank Nifty and FinNifty declined moderately by 0.35 per cent and 0.06 per cent, respectively. The India VIX declined by 5.08 per cent to 11.73. The FIIs sold Rs.25,751.02 crore, and the DIIs bought Rs.66,183.51 crore worth of equities in this month. The Nifty has formed a shooting star candle on a weekly chart. The volumes were higher, indicating the distribution. The index reacted from the 61.8 per cent retracement level of the prior decline. It began the week with a huge gap up and closed at the low of the week. It is able to protect the Monday’s gap. The index closed below the 10-week average and the 50 DMA decisively.

As we cautioned, the Index faced resistance at 25100-160 zone, which is a 61.8 per cent retracement level of the prior decline. It also declined below the 23.6 per cent retracement level of the recent upswing. The immediate support is at the 38.2 per cent retracement level, 24841. Below this, the 20 DMA of 24730 and the 50 per cent retracement level is at 24745. These are the important supports for now.

On Friday night, the Jackson Hole speech by Federal Reserve Chairman Jerome Powell hinted at a rate cut as soon as possible in September. Immediately after Powell’s comments, global equity prices surged as lower rates tend to reduce borrowing costs. The Dow Jones Index closed at a new lifetime high with a 1.89 per cent gain. the NASDAQ-100 and S&P-500 also gained over 1.50 per cent. The Gift Nifty gained 121 points. The softer tone led to a drop in the U.S. dollar index, making emerging market equities more attractive and potentially boosting foreign institutional investor (FII) flows into markets like India. The domestic markets’ benchmark indices may open with a big positive gap up. The interest rate-sensitive sectors, like BFSI, Real Estate, and Capital Goods stocks, may be in the limelight. But, stay with caution, as Powell himself expressed a need to proceed “carefully” and did not commit firmly to the timing or size of cuts.

After opening with a gap up, around 25000, it must sustain above the first hour’s high. A close above the 25154 will be positive and can resume the upward movement. In the bull case scenario, the Nifty must continue to rally beyond 25222. Then there will be a possibility of reaching new highs in the next 2 - 3 months.

The weekly and daily RSI are in the neutral zone, 50-55. If the RSI moves into the bullish zone above 60, along with a price move beyond 25222, it is a strong bullish signal. The MACD shows a waning of momentum. As the -DMI is above the +DMI, there is a negative sign. The ADX line is still above 25, but it is declining, which is not good. Next Wednesday is a holiday as Ganesh Chaturthi. There are only two trading sessions before the monthly expiry. The rollovers will be crucial. Watch behaviour in the 25100-24730 zone. Out of this zone will be an impulse directional move. Focus on Banks and Financials.

(The author is partner, Wealocity Analytics, Sebi-registered research analyst, chief mentor, Indus School of Technical Analysis, financial journalist, technical analyst and trainer)