Nifty : Market enters medium term bearishness

Nifty : Market enters medium term bearishness

Market witnessed one of the worst weeks as it had fallen on all the 5 days of the week without any reprieve. Bank stocks were the worst hit as PSU...

amarnatha shastryMarket witnessed one of the worst weeks as it had fallen on all the 5 days of the week without any reprieve. Bank stocks were the worst hit as PSU Banks seek multi-year lows. There appears to be something more than that meets the eye with PSU Banks as market has been punishing them at every level and market discounts future in advance.

Though RBI policy did not change the key rates, rupee weakness once again surfaced despite recent RBI moves and equities drifted lower. Macro fundamentals are not encouraging in view of the depreciating currency, CAD and slowing growth rate. The Q1 results have not been encouraging. FII flows, global cues, currency fluctuation would guide the market and high degree of volatility can be expected with bearish bias.

Technically, Nifty is trading above 200 DMA and Golden cross (50 DMA above 200 DMA) is in operation. But, during the forthcoming week this phenomenon would be negated and Death cross (50 DMA below 200 DMA) would replace Golden cross, unless Nifty is able to sustain above 5850/5900, and Nifty breached 5750/5700 level and continuously traded below, suggesting medium term bearishness and Nifty could seek lower levels unless it is able to trade above 200 DMA.

Further, FIIs too might not enter market in a big way unless currency situation improves. Nifty is bearish in all time frames i.e., short, medium and long term as long as it trades below 200 DMA. Short term uptrend would be restored if Nifty closes above 5825 mark. As Nifty has been oscillating in a narrow zone of 750 points (6240 to 5480) in the last Six months, a clear direction can be expected sooner than later and the current calendar year range of 750 points would usually get widened to more than 1250 points before the end of the year and as it appears it is likely break on the lower side. For the coming week, Nifty spot is expected to face resistance at 5755, 5830, 5905 and find support at 5605, 5530, 5454. Nifty, presently in short term Bearishness, would get out of the same only on a close above 5825.

Advice for Traders
Nifty corrected sharply without any pullback and in view of the oversold zone a technical pullback can be expected which may be utilized for selling. Unless Nifty continuously trades above 5875, it can seek lower levels. Sell on rise up to 5800 with Stop and Reverse above 5900. Further, Weekly Open level is very important for the entire week. Short positions may be avoided as long as it maintains / closes above Weekly open and vice versa.

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