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Should We Prepare for a Breakdown Actually?

So, at last, we ended up in GREEN on Friday at least a good relief rally in the Nifty 50 index, which was expected too much by all punters from the last three days. It was actually hovering around the oversold zone with minimum PCR, But After continuing to decline for the major part of the week and a strong short-covering led bounce back on Friday, the NIFTY50 index still ended with a net loss of 233 points (-1.34%) on a weekly basis.

Nifty Monthly Chart

The monthly Nifty 50 Chart is not actually indecisive, it is clearly showing that it actually ended below the previous month, so after two months of a bounce, the Nifty 50 again started sliding towards the downside of the long channel

Nifty Weekly Chart

Nifty 50 Weekly charts is supporting the monthly chart. The week started with GapDown somehow managing to close its highest point, But actually, It is closed below the previous week's endpoint.

Nifty 50 Weekly with Volume

You can see that Volume speaks for itself. the Weekly volume of RED candle has crossed all recently previous days GREEN Volumes, made earlier. And this is when we have approximately 500 points upward rally in the Nifty 50 index.

Nifty50 Daily Chart

Nifty 50 daily charts candle actually ended up with Green, but you can see the volumes are on is selling side only. So it is called only short covering which was pending to cover, and due over 1 Lacs contract from last few days.

Nifty 50 Daily Chart with SMA

Nifty 50 is able to close above 200 DMA, but it is clear that there is no fresh purchasing, it was due to short covering only.

As per money flow, FIIs have already started making new Short positions in Nifty future from the last week of September, and still, they are confident, that even 500 points huge movement in intraday, does not able to change their mind and they are still increasing their future shorts in October Expiry.

DIIs are also making their position hedge.

For the week ending October 6th, 2022

On the long-term monthly chart, the index is seen consolidating in a broad and defined trading range of 16000-18600 levels.

The previous week has seen the index bouncing off the 20-Week MA which is at 16801. This makes the level of 16801 an important support point for the markets on the weekly charts for the near future.

The 20-Week Moving Average is below the 50-Week MA; this indicates the loss of momentum in the present phase.

The US markets have continued to stay weak; S&P 500 has violated important supports. However, they now stay oversold as well.

The coming week is likely to see the levels of 17165 and 17300 acting as resistance. The levels of 17000 and 16800 will act as potential supports.

Breaking down below 16800, the immediate support would be 16500.

It is advised to trade with strict stop loss to save your profits and if you are a scalping expert, book your trade from time to time quickly.

No Long term position for investment is advised at present

Happy Trading

Keep Investing


Neeraj Bhatia

Managing Director

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