When virus hacks the market

NIFTY remained under pressure in the previous week amid weak global cues. For the entire week, bears had an upper hand over the bulls as the Nifty index made lower high and lower low formation on the daily chart.

Nifty also formed a big bearish candle on the weekly scale and it has been trading in the rising wedge pattern since September 2018, where the support of the rising trend line of wedge pattern is coming around 11000. So there is still room for 200 points in Nifty on the downside. Now, the overall trend for Nifty continues to remain negative until it reclaims 11600 marks on the higher side. The momentum indicator MACD has already provided sell crossover in the previous week which is hinting of further weakness in the Nifty. The odds of correction to continue are higher than reversal at this point.

Although after falling for the seventh straight session, dead cat bounce cannot be ruled out. We expect a tepid start on Monday with a negative bias.

On the derivative front, Call writers are scattered among a majority of the OTM strikes from 11300 to 12000 strikes, whereas put writers have shifted their base to 11000 strikes. F&O data indicates that a decisive break below 11000 could take Nifty towards 10700.

The sentiment indicator “INDIAVIX” surged 67% in this week to end at a 9-month high of 22.8 levels, which is a big cause of concern for the bull and it has to cool down below 18-16 levels.

BANKNIFTY traded in line with Nifty and remained under pressure throughout the week. The next support is now pegged at 28600 and below that, it may drift to 28000 levels. Resistance is placed at 30000 levels.

Author: Mr.Nilesh Ramesh Jain, Derivative and Technical Analyst (Investment Services), 29th Feb 2020


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