Stock Market Today: HDFC Securities on what drove Nifty 50 and near-term outlook
Nifty slipped into a sharp weakness on Monday and closed the day lower by 163 points at 11768.
Indian equity benchmark indices ended lower on Oct 26 amid weak global cues and a stimulus deal that remains elusive in the U.S. European indices and Dow futures drove the movements in Nifty. Today, at close the Nifty 50 index, ended 1.36% lower at 11,767. All indices ended in the negative with Metals, Auto, Realty and Pharma indices falling the most.
Asian markets are mixed Monday with traders increasingly pessimistic that U.S. lawmakers will pass a new stimulus package before next week's election, while spiking virus cases fanned worries about the economic impact of new containment measures. European shares fell on Monday after SAP, one of the region’s biggest tech groups, warned that the new coronavirus lockdowns in countries have hit demand for its services. Oil prices sank more than 3 per cent on fears that rising infections would hit demand.
After showing a range bound action in the last 4-5 sessions, Nifty slipped into a sharp weakness on Monday and closed the day lower by 163 points at 11768. After opening on a slightly positive note, Nifty moved into a usual range in the early part of the session. The sharp downside momentum got triggered in the mid part and Nifty showed weakness in the later half and finally closed the day with minor upside recovery from the day's low of 11712.
A long bear candle was formed with a minor lower shadow. Technically, this pattern reiterates a presence of key overhead resistance around 12000 mark, but the market has managed to close above the immediate support of 20 period EMA at 11736.
The formation of long range negative candles has failed to show sharp follow through weakness in the market in recent times. After the formation of the long bear candle on 15th Oct, the market has witnessed a meaningful upside bounce for the next four sessions, before declining from the highs. The high of the bearish engulfing pattern remains intact at 12025 levels.
Hence, the formation of long range bear candle on Monday is expected to bring bulls back into action from current levels or from the lows as happened in the past. The important lower support is placed around 11650-11600 levels (intermediate trend line-weekly chart).
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Nifty on the weekly chart is still placed within a broader high low range of 12025-11660 and we observe a formation of small bull and bear candles above the support area of 11650 (significant trend line support as per the concept of change in polarity, after breaking above it recently - weekly chart).
Conclusion: The short term trend of Nifty seems to have reversed from the highs, but the near term trend status of the market remains range bound around 12000-11650 levels. The sharp follow through weakness is not expected from here in the short term, but there is a possibility of an upside bounce emerging from here or from slightly lower levels. The crucial lower support is placed around 11650-11600 levels.
Nifty has filled the upgap formed on Oct 19 and shows a lower top formation. 11661 is the crucial level, a fall below which will mean a lower bottom formation in addition to lower top. On upsides, 11876-11897 could provide resistance.
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