Market sentiment has been subdued due to persistent selling by Foreign Institutional Investors (FIIs), a rise in US bond yields, and concerns surrounding the upcoming election outcome. Analysts anticipate that this trend of volatility is likely to persist in the near future, especially in the absence of significant positive catalysts.
Going ahead, experts indicate a negative outlook for the Nifty, cautioning traders against buying on dips until positive signs emerge.
They believe that the Nifty trend and outlook are now negative for near-term (daily), short-term (weekly), and midterm (monthly charts) traders, implying a negative risk-reward proposition for traders. The momentum had strengthened materially so the chances of a change in trend to negative are now high.
Amid this ongoing decline, experts have given key levels to watch out for. Here’s what they suggest:
Asit C Mehta Investment Intermediates has suggested avoiding buying this dip as Nifty closes below 22,000.
He has listed 5 observations to support this-
1. It’s a breakdown of this calendar year’s trendline for Nifty on a closing basis.
2. Negative divergence between RSI and Price.
3. Possibility of double top formation on a near-term basis.
4. On the verge of breaking down of a channel which is upward sloping.
5. Correction led by heavyweights with high volumes viz. L&T, Asian Paints, ITC, Bajaj Finance, HDFC Bank, and Reliance Industries.
AVOID buying on dips till the positive signs don’t emerge, he reiterated.
Sameet Chavan, Head Research, Technical and Derivative – Angel One, also advised traders to not be swayed by temporary rebounds and to maintain light positions until concrete signs of a bullish reversal emerge, especially with the impending Lok Sabha election results.
Regarding levels, the 89EMA at 21,900 serves as immediate support, followed by previous swing lows in the 21,800-21,700 range. On the upside, the zone between the 20 and 50EMA, around 22,200-22,300, presents a formidable obstacle. Traders are urged to monitor these levels closely and adjust their trading strategies accordingly, said Chavan.
Meanwhile, BlinkX from JM Financial believes that a pull-back from around 21,900 levels playing out on expected lines and is likely to continue up to 22,200 from where another round of sell-off is likely.
“The area of 22,200-22,300 will act as a stiff resistance and indecisiveness within this 100-point range will trigger a volatility spike. Only on a decisive close above 22,300, Nifty will resume an uptrend to re-test the 22,750-22,800 area. High probability of this move occurring post one more week of volatility according to time-price analysis. The entire structure of a pull-back rally, one more round of sell-off followed by sideways movement and then a resumption of the uptrend will negate only a close below 21,700. For this week, Nifty will be highly volatile within 21,700-22,300,” it predicted.
Furthermore, Anand James, Chief Market Strategist, Geojit Financial Services, noted that the break of 22,000 in Nifty did bring in jitters, and the recovery swing on Friday failed to push much above the upside marker of 22,095. Seen in isolation this suggests that the 21,500 trajectory continues to be in play.
“However, the formation of an inside bar, especially at the Bollinger band extremity, gives us a whiff of hope that a relief rally aiming 22,223-22,400 is likely to unfold in the early part of this week. A similar setup in oscillators as well as directional moving indicators was seen in late April when a vertical recovery from 21,777 unfolded. A direct fall below 21,777 or inability to clear 22,095 will negate upside hopes,” forecasted James.
Traders are advised to closely monitor key levels and adjust their strategies accordingly amidst the prevailing volatility.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
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Published: 13 May 2024, 01:13 PM IST
