Analysts said the market action of the last two sessions has replicated the pattern of Nifty50 weakness seen on January 15 and January 18. They are cautious, even as they believe a small pullback cannot be ruled out.
“The emergence of a sharp selling pressure in a very short span of time (without showing reasonable upside bounce or non-consumption of sufficient trading days) hint that the market could be poised for deep correction from here. Long positions need to be cautious,” said Nagaraj Shetti of HDFC Securities.
For the day, the index closed at 14,365.15, down 225.20 points or 1.54 per cent. The index is now approaching its crucial support at the 20-DMA placed at 14,290.
“So far, the 20-DMA has been acting a stop loss and a breakdown from this moving average could trigger additional deeper correction dragging the index towards 14,220-14,075. That said, following the sharp decline, Nifty has reached oversold on the shorter time frame, suggesting a temporary pull back cannot be ruled out,” said Aditya Agarwala, Senior Technical Analyst at YES Securities.
Mazhar Mohammad, Chief Strategist at Chartviewindia.in, said that the index formed a shooting star candle on the weekly charts. He believes that if the Nifty50 slips below 14,350 level, eventually it should slide down all the way towards the 13,950 level.
“The bulls may try to make a comeback as the current corrective structure appears to be unfolding in the form of an Expanded Flat in Elliot Wave parlance which has the potentiality to culminate below 14222 levels paving the way for a pull back rally. Therefore short side traders need to remain cautious as Nifty approaches the said levels. Strength in Nifty shall not be expected unless it registers a close above 14650 level,” he said.
