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Technical View: Nifty recovers to form bullish candle but still ends up 2.4% down

March 19
18:28 2020

On another volatile day of trade, the Nifty50 reversed most of the losses suffered in the opening hour to close off the day’s low on March 19.

Measures unleashed by government and central banks have failed to calm the growing global panic over escalating coronavirus cases and investors continue to be jittery. Foreign institutional investors are on a selling spree and that has also rattled the market.

The index broke the all-important 7,900-mark in early trade but recovered sharply before signing off with a positive tick on intraday charts to form a bullish candle on the daily scale, but took a hit of 2.4 percent compared to previous session’s close.

Technically, the sharp recovery from the day’s low indicates that the market may see some consolidation at current levels, but global cues could continue to drive sentiment, experts say.

The Nifty opened sharply lower at 8,063.30 and within few minutes hit the day’s low of 7,832.55. It remained volatile for the remaining day. The index gradually recovered and returned in the green in afternoon but failed to hold the gains to close 205.35 points, or 2.42 percent, down at 8,263.45.

“This kind of recovery after testing strong supports present on long-term charts around 7,900 can be an indication that the Nifty is heading for a consolidation, provided it sustains above 7,832 for at least the next couple of days,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in, told Moneycontrol.

According to him, if the index breaches 7,832, then the slide can continue towards 7,548. However, sustaining above 7,832 levels, the ideal range for consolidation would be 7,900–8,500, he said.

Considering the volatile phase, a sharp correction in blue-chip counters shall be considered as an opportunity for long-term investment, Mohammad said.

Nagaraj Shetti, Technical Research Analyst at HDFC Securities, also said, “The short-term trend of the Nifty continues to be negative. Today’s minor buying from the support could cheer the bulls to make a comeback. But, the chance of sustainable upside bounce could be less. Any attempt of up move towards 8,500-8,550 could be a sell on rise opportunity.”

The fall in broader markets was more than frontliners. The Nifty Midcap index was down 4.3 percent and the Smallcap index lost 5.5 percent.

All sectoral indices closed in the red with auto (down 5.8 percent) and metal (down 5.3 percent) falling the most.

The Nifty Bank also recovered 1,368 points from the day’s low of 18,675.65 to form a bullish candle on daily charts, as the closing was higher than opening levels (19,428.95) but the index settled 2.41 percent lower at 20,083.50.

“Support for the Nifty Bank is coming near 19,400-19,000 zone and resistance is near the 20,600-21,100 zone. Any break above 21,100 can result in good short covering in the index,” Rohit Singre, Senior Technical Analyst at LKP Securities, told Moneycontrol.

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