Technical View - Oct 19, 2021 - Mr. Nagaraj Shetti, Technical Research Analyst, HDFC Securities
2021-10-19 22:10:07 (Time Zone: IST)
After showing lackluster type pattern at the swing highs on Monday, the Nifty witnessed weakness with high volatility on Tuesday and closed the day lower by 58 points. After opening with an upside gap of 125 points, Nifty made an attempt to move up in the early part of the session. Sharp intraday weakness has triggered in between and the upside recovery attempt has failed and Nifty closed near the day's lows. New all time high was registered at 18604 levels and the opening upside gap has been filled completely.
A long negative candle was formed on the daily chart after opening higher. Technically, this pattern indicate a formation of 'bearish engulfing' type candle pattern at the swing highs. Normally, a formation bearish engulfing after a reasonable upmove are considered as a trend reversal pattern post confirmation. Hence, this weakness after trot of seven sessions upmove indicates more weakness in the coming sessions.
The theory of correlation between 10 day EMA and movement of Nifty as per daily chart seems to have confirmed again. After widening gap between 10day EMA and Nifty, the market has started to correct down from the highs, as happened in the past and is likely to slide down to the support of this moving average around 18150 levels in the short term.
Conclusion: The continues upmove of the last 7 sessions has been broken and the market has shifted into a profit booking mode. The overall negative chart pattern indicate more weakness in the next 1-2 sessions. The next lower levels to be watched are 18200-18150 (10day EMA). Any upmove from here could find resistance around 18470-18500 levels.