We had a nervous start for the week on Monday in line with not so favorable global cues. Nifty challenged 18,400 in initial hours; but fortunately, it took a U-turn after testing the midpoint of 18,400-18,300 support range. The upward move continued for next couple of sessions to almost reclaim the 18,700 mark. On Wednesday night, Fed announced a rate hike by 50 bps, which was in line with consensus; however, later, the Fed governor’s commentary spooked market participants across the globe. This poured complete water on early week recovery.
The benchmark index Nifty has now sneaked below the key swing low of 18,350 on a closing basis. Ideally looking at the price structure, the development does not augur well for the bulls. A close below this support opens the possibility of an extended correction in the coming week. We may be biased, but we are still not convinced with this close. Only a follow-through selling may lead to further weakness towards 18,130 - 18,000 - 17,900 in coming sessions. Even if this scenario pans out, we do not expect the correction to aggravate below the lower end of this support range. The higher degree up trend remains intact as long as we manage to hold this. Since the market was deeply overbought, we must consider this as a running correction. On the flip side, 18,450 - 18,600 are to be treated as immediate hurdles. If bulls have to regain their strength, 18,450 needs to be surpassed with some authority, which will negate the breakdown from the small ‘Head and Shoulder’ pattern on the daily time frame chart.
Access the complete report here: Technical & Derivatives - Weekly Report