Friday came as a massive negative surprise for the equity markets. With US markets closed due to the Thanksgiving holiday, no overnight cues were expected. However, renewed covid fears gripped the equity markets overnight which saw the Asian markets opening with deep cuts. Indian markets were no exception. The opening of the Indian markets was somewhat relatively resilient as the NIFTY tried to limit its losses in the first hour of the trade. However, the Indian markets succumbed to global weakness as well. The entire session was gripped under fierce selling pressure as the NIFTY slipped below 17000-levels for a moment. No major recovery was seen from the lower levels; the headline index ended the day with a deep cut of 509.80 points (-2.91%).
Monday is likely to see a jittery start to the week. If we take into account the validity of the Head and Shoulder formation on the daily charts, then the price targets through classical measurement tools fall near the 16600-16700 zone. On the other side, the selling might be overdone for a while and the NIFTY may try and find a reason to show a technical pullback. In any case, the initial hours on Monday are likely to remain jittery. The volatility witnessed a massive surge; INDIAVIX spiked by 24.85% to 20.8025. The NIFTY has also closed a notch below 100-DMA which presently stands at 17100. It would be crucial to see if this level is defended by the close of the day.
Monday is likely to see a shaky start; the levels of 17180 and 17225 will act as potential resistance levels. The potential supports come in at 16900 and 16780 levels.
The Relative Strength Index (RSI) on the daily chart is 31.24; it shows a bullish divergence against the price. The daily MACD is bearish and stays below the signal line. A large black body shows the strong momentum on the downside that persisted during the day.
The price has closed outside the lower Bollinger band. Although this may result in a continuation of a downtrend, looking at other factors that affect the markets, some pullback inside the band cannot be ruled out.
Importantly for the next couple of days, we may see the markets violating the technical rules as they are being governed more by fear and knee-jerk reactions to a refreshed covid concerns. We recommend avoiding aggressive shorts and keeping fresh buying limited to only traditionally defensive stocks like Pharma, Consumption, and IT. Any further buying in any of the sectors should be refrained even if a technical pullback occurs as relatable directional cues would be available only after the markets stabilize. A highly cautious view is advised for the day.
This was first published by The Economic Times.
Milan Vaishnav, CMT, MSTA
Consulting Technical Analyst
Member: (CMT Association, USA | CSTA, Canada | STA, UK) | (Research Analyst, SEBI Reg. No. INH000003341)
