The previous week remain a technically damaging one as the NIFTY violated a few important supports while closing on a negative note.
The volatility too increased; this was though on the expected lines. The past ve days also saw the global markets dealing with the collapse of SV Bank; the negative sentiment was seen across the globe in the equity markets.
The trading range too remained wide; the NIFTY oscillated in a range of 679.75 points. In the end, despite the recovery seen on the last trading day, the headline index closed with a net loss of 312.85 points (1.80%) on a weekly basis.
As I am writing this technical letter on Tuesday, post-market, this journal, is having an impact on the Monday and Tuesday post-market activities covered as well.
Let us have an insight into what is contained in the rest of the week:
Nifty 50 Index Weekly Chart
As we can see in the Nifty 50 Index Weekly chart, the benchmark index has successfully got a rejection from the last week's low, which was at 16850. and the previous two days show a little strength, but not significantly with good volumes.
It could be probably because the market is waiting for the outcome of the FED meeting, which is going to be announced on Wednesday Night (IST).
Nifty 50 Index Daily Chart
The Nifty 50 Index Daily chart is also showing the rejection from its low level, but again the same issue is that there is no significant volume is visible.
Well, we can say that if the FED pauses the increase in interest rate, which will be a short-term bullish sign for the equity market, then initially Nifty can touch at least the 200 daily moving average.
Outlook for Coming Week starts from 20th March -2023
The volatility of the Nifty 50 Index will be based on the outcome of the FED chairman's statement. Will it be Dowish or will be Hawkish?
Market participants have speculated that the Fed may pause or slow down its rate hikes in light of the turmoil in the banking sector triggered by the collapse of Silicon Valley Bank (SVB) earlier this month.
SVB’s failure exposed vulnerabilities in some regional banks and prompted emergency interventions from regulators and other banks to prevent a wider contagion.
The Fed itself provided record amounts of liquidity to banks through its discount window and other facilities.
According to Reuters data, traders of U.S. rate futures have firmed up bets that the Fed will raise interest rates by 25 basis points next week, slashing the probability of a pause to about one chance in five.
This reflects recent data showing continued strength in the labor market and housing indicators, as well as signs that inflation may be slowing down slightly.
Ultimately, what matters most for stock markets is not just what the Fed does next week but what it says about its outlook for inflation, growth, and financial stability especially given recent developments in the banking sector and how it communicates its policy strategy going forward.
Support Level for the Coming Week for NIFTY:
As per technical charts, we can see the support coming from the level of 16900 and it breaks decisively, then 16710.
Resistance Level for the Coming Week for NIFTY:
We can see the resistance level could be 17250, followed by 17350.
Overall, the markets are presently at a critical juncture. They are trapped in a narrow 300-400 points trading range.
On one hand, it has dragged the supports lower to the 17350-17450 zone; on the other hand, it is just barely above the important support levels of 16850-17000.
The coming week needs to be dealt with with a lot of caution; it would be crucial to see the behavior of the NIFTY vis-à-vis the zone of 16850-17000 levels as keeping head above this will be extremely important.
The pattern analysis of the weekly charts shows that the NIFTY has violated the falling trend line pattern support by slipping below it. This falling trend line begins from 18604 and joins the subsequent lower tops. However, though this trend line support stands violated, the index has defended the 100-Week Moving Average. This is currently placed at 17050 and remains an important support for the market on a closing basis.
It is recommended to continue keeping leveraged exposures at modest levels while approaching the markets on a highly selective and stock-specific note.
Thanks for reading.
Neeraj Bhatia (Managing Director)
Disclaimer: I am not a SEBI Registered technical Analyst, so consult your financial advisor, before taking any trade. This technical post is only for learning purposes.