The markets began the week strongly, with the Sensex and the Nifty closing above 40,000 and 12,000 on Monday on expectations of an RBI rate cut on Thursday. The concerns over the DHFL crisis and rating downgrades overshadowed the bullish sentiment and the benchmark somewhat erased the gains it made on Monday.
On Thursday, the announcement of reduced policy rates and RBI’s dovish stance in the credit policy failed to impress investors in the absence of any immediate measure to deal with the NBFC crisis. The markets sold off immediately worrying about the possibility of contagion and fresh NPA creation due to defaults and rating downgrades etc.
Nifty Long Term
Nifty Closed the week almost flat with a sort of Doji formation reflecting the indecisiveness in the minds of investors. The Weekly RSI is on the verge of a negative crossover which will come if we have a negative close next week. PPO looks like topping out.
Nifty Intermediate Term
The support zone of 11800-11850 is still holding even though on an intraday basis markets went below that zone on Friday. Closing below this zone will be the first sign of weakness.
Nifty Short Term
The larger Wedge was executed on Thursday after the RBI policy announcement owning to investor disappointment on any immediate measure to deal with the NBFC crisis. A smaller “Rising Wedge” was formed as a result of the sideways market trend on Friday. The target for the same upon execution below 11840 is around 11570.
The AD line is on the verge of making a new low. On the previous two occasions, marked in Red arrow, whenever the AD line had made a fresh low even when Nifty is sideways it has triggered a selloff in the markets.
Stay cautious and maintain strict SL for your long positions.