Nifty finally gives up around 11350: Angel Broking

Weekly Market Wrap Up by Mr. Sameet Chavan (Chief Analyst-Technical and Derivatives, Angel Broking):

"This week, our markets started off higher owing to favorable cues from the global peers. Subsequently, index slipped into a consolidation mode as the real focus shifts to the mid and small cap universe. For the first four straight sessions, Nifty gyrated in a very slender range around 11300-11350. The similar price behavior was witnessed on Friday as well during the first half. However, all of a sudden, major global markets started correcting sharply which had a rub off effect on our market as well. Nifty which was merely vacillating in a range of 80-100 points throughout the week, finally succumbed to the selling pressure and went on to test the 11100 mark. Eventually, due to modest recovery towards the fag end, Nifty concluded the week tad below 11200, marking more than a percent loss on Friday.

Friday's correction was no surprise to us as we have been consistently advocating caution in our intra-week commentary as well as previous weekly report. Let us first understand why 11300 - 11350 is considered to be a sturdy wall. Firstly, the 78.6% retracement of the entire fall from 12430.50 to 7511.10 comes around it. Secondly, the 100% 'Price Extension' of the first up leg (7511.10 - 9889.05) from 8806.75 precisely coincides around 11300-11350. Now, if we take a look at the daily chart, the 'Head and Shoulder' pattern is clearly visible and this is what we mentioned in our daily commentary. Friday's low precisely coincides with the neckline level of this pattern. Hence, going ahead, a breach of 11100 would lead into an immediate correction towards 10975 - 10875. Here, 10875 would be seen as a key support, because a breach of this would result in a strong corrective move in the next few days. This was overall a price-wise hypothesis on Nifty; but we would also like to highlight one time-wise observation as well. On the weekly chart, if we apply 'Fibonacci Time Series' from March lows, the current weekly candle ends 6th 'Time Zone' and is entering a new one. Generally, such points are considered a potential reversal zone and hence, one needs to be a bit cautious going forward as our anticipation may probably turn into a reality below 11100.

Throughout this week, our benchmark did nothing and the real action was seen in the broader market. As we all know, when mid and small cap counters start moving, it generally creates a euphoric situation and this is exactly what we witnessed. Since the MIDCAP 50 was approaching the '200-SMA' on the weekly chart, we advised caution on Thursday and the index obliged to our view. To summarize, we would like to mention that even if the market goes through some corrective phase for some time, it will certainly not be as severe as the March one. Hence, a healthy correction would probably provide better entry points for those who have missed the bus in the last few months."

Source : Equity Bulls

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