Updated: Oct 14
In our last technical journal, we suggested that the downside of the broadest range could be 19820. We proved wrong, because, The FIIs selling was so heavier in the cash market which pushed the downside breached all immediate supports, and touched the lowest level of the week at 19657, which was not expected by us.
Post Market Weekly Analysis
The Nifty 50 weekly Index opened at 20155.95 touched the high level of 20195.35, and slipped down to 19657.50 before closing at 19674.25. so the benchmark index oscillated in a range of 537 points over the previous five trading sessions, finally closing with a net profit of 518 points, i.e. in percentage term (-2.57%) on a weekly basis.
Nifty 50 Index Monthly Chart
A massive rejection from the top can force the market to go for massive consolidation in the coming week, but if it breaks the level of 19600, on a closing basis will bring a massive fall awaiting, which can stop first at nearly range of 19400 and 19500, levels then follow up by 19200 and next final follow up levels could be the range of 18900 to 19000 only.
Nifty 50 Index Weekly Chart
The full-body Marubuzo RED candle is the invitation for a trend reversal soon. Until the support is intact at 19600 levels, we can see the massive consolidation. The monthly expiry can see the rollover activities, which will definitely invite volatility.
Nifty 50 Weekly Fibonacci Chart Status - Extension
The Fibonacci chart shows, it sharply retraced from its previous week's level, which was near 1.00% to nearly 38.2%, and slipped down to approximately 66% in one week.
For the coming weeks, it is not a good sign obviously, if the benchmark index will not slip into the consolidation zone.
Nifty 50 Weekly Fibonacci Chart Status - Retracement
In the last technical journal, we adjusted the chart, with aligned index movement, but once again, we need to re-adust the chart with a retracement part, instead of an extension. 19200 levels are seen as approachable soon in the coming days if the retracement continues on the same spree.
If the market enters into a consolidation zone, we can see levels in the range of 19838 to 19437 in the coming week.
Nifty 50 Index Weekly Chart
RSI Indicator Pattern
If we look at the weekly chart with the assistance of technical indicators, we can see that the weekly RSI is at 61.45 and it shows a mild bearish divergence against the Index price, through candlestik patterns. While the Index price is still maintaining its higher high, the RSI did not, and this led to the development of a bearish divergence of RSI against the price.
MACD Indicator Pattern
The weekly MACD is bullish and above the signal line. However, the narrowing histogram shows that this indicator may show a negative crossover in the coming weeks.
This indicator is neutral, which, indicates a slight recovery on Monday will be on the cards, but in weekly trading sessions, it can not show any great bullish pattern so far.
Nifty 50 Index Daily Chart
SMA (Simple Moving Average) 9 and 21, have been breached, and the benchmark index is staying just above SMA 50. The third and fourth trading sessions from the previous week had a gap-down opening, which indicates cash-based selling by FIIs and retailers. If it continues in the same way, SMA 100, is not too far, which is sitting at 19200 levels so far.
Nifty 50 Index Daily Chart with Technical Indicators
The Daily chart pattern with technical indicators seems more bearish than the weekly chart. All indicators like Money flow, RSI, and MACD are showing a bearish pattern for the coming week. But a short recovery can not be ruled out, considering, out of 5 previous trading sessions 4 ended with a negative closing.
FII's Cash Monthly and Weekly Activities
As we suggested the third and fourth days were having gap down opening sessions. We can see the sessions dated 20th September and 21st September are proof of that.
Funds flow from foreign institutional investors (FII) is another factor under close watch, after the severe selling last week following the Fed's hawkish tone and the elevated US 10-year treasury yields and the US dollar index. The high valuation concerns even after the 2.7% market correction from the record high also triggered FII selling.
It seems that FIIs will remain sellers given the strength in US bond yields and the US dollar index.
FIIs have net sold Rs 8681 crore worth of shares in the cash segment for the week ended 22nd September 2023, taking the total monthly outflow to Rs 18261 crore, while domestic institutional investors (DIIs) failed to offset the entire FII outflow as they bought Rs 1940 crore worth shares in the week passing by and their net buying for the current month was Rs 12169 crore.
The US 10-year treasury yields jumped 4.49 percent during the week, the highest level since 2007, before settling at 4.44%, while the US dollar index, which measures the value of the US dollar against the basket of world's leading six currencies, jumped to 105.58 levels, the highest closing since November 2022, continuing uptrend for 10th consecutive week.
Outlook for the NIFTY 50 Index for Coming Week starts from 9th October 2023
After severe correction, the market is likely to consolidate further with negative bias in the coming week with the focus mostly on global cues (including US GDP numbers and bond yields) due to the absence of major domestic data points and the scheduled monthly expiry of September derivative contracts may also cause volatility
The technical analysis of the weekly charts shows that the Nifty 50 index trades above all key moving averages, however, it has resisted the upward-rising trend line, which begins from 18900 and joins the subsequent higher tops at 19990 and 20200 levels. This means that until and unless the most immediate high of 20200 is not taken out comprehensively, we will find all upsides finding resistance near this level.
The previous week India VIX closed at 10.66 from 10.90 Within five trading sessions, it touched the high of 11.47, It lost on a closing basis by 0.2425 (-2.22%) on the weekly basis.
Despite the corrective decline, the volatility index did not rise. This continues to keep the markets vulnerable to incremental corrective retrenchment.
Support Level for the Coming Week for NIFTY:
The broader support level on the technical chart could be in the range of 19500 followed by the level of 19380. levels.
Resistance Level for the Coming Week for NIFTY:
The broader resistance level on the technical chart could be 19850, followed by 19900 levels.
Reading Current Option Data:
The weekly options data suggested that 19500 is expected to be critical support in the near term, followed by 19000 given the bearish sentiment, whereas the
near-term resistance may be at 19800-20000 levels.
The maximum Call open interest was visible at 19800 option strikes, followed by 20000 & 19900 option strikes, with meaningful Call writing at 19800 option strikes, then 19700 option strikes.
The maximum Put open interest is at 19000 strikes, followed by 19700 & 19500 option strikes, with Put writing at 19000 strikes, then 19600 & 19700 option strikes.
Technical View for the coming week:
The benchmark index has decisively broken its crucial support of around 19850 to 19900 levels. The next critical support is likely to be the 19500 to19400 levels, followed by 19200.
In case of recovery, the Nifty 50 index may face resistance at 19800-20000 levels in the coming week, but remember that considering the bearish sentiment, any rally may get sold into in the near term.
The Nifty 50 Index also slipped below the short-term moving average (20 EMA - placed at 19770) and held below the same. It may result in possible consolidation in the index with the bias on the negative side.
We expect the Nifty 50 Index to hold the 19200-19550 zone while the 19900-20100 zone would attract selling.
Local and global Events to be considered
Investors will also watch out for the GDP numbers of the UK for the June quarter 2023, and the weekly jobless claims and pending home sales for August by the US next week.
Overall, there are higher possibilities that defensive pockets like IT, pharma, PSU banks, and low-beta sectors like PSE also do well.
Although some short-term technical rebounds cannot be ruled out, any continued corrective retrenchment will have the potential to take the markets back to the breakout point of 18900-19,000 levels.
The cautious outlook is advised for the coming week.
Thanks for reading.
Disclaimer: I am a National Stock Exchange certified Technical Analyst and Chartist but not a SEBI Registered Analyst, so consult your financial advisor, before taking any trade. This technical weekly post-market journal is only for learning purposes and it is downloadable free of cost. The views written here are entirely only my personal views. I am not forcing anyone to follow my thoughts. I do not have any WhatsApp Group ID or Telegram ID related to it.