After showing sideways range in the last 5-6 sessions, Nifty slipped into a sharp weakness on Monday and closed the day lower by 254 points. A long bear candle was formed, that has broken below the crucial lower support of 20 day EMA at 11415 and closed lower.
The support of 20 day EMA has been offering support for the Nifty in the last few months. The downward breakout attempt of couple of occasions have resulted in a false downside breakout and the market regained that support in a short period of time. Now, the market has closed below that moving average support on Monday. If Nifty fails to regain that support in the next 1-2 sessions by showing upside bounce above 11450, then one may expect resumption of broad based weakness in the market.
Recently, the formation of long bearish candles have witnessed minor follow-through declines in past. In the last few occasions, Nifty showed upside bounce immediately after the formation of such long bear candle. Hence, any further follow-through weakness from here could mean more sharp declines in the near term.
The short term trend of Nifty seems to have reversed sharply. Now the market is set to show more weakness in the near term. The lower area of 11100-11150 is likely to offer minor support for the market in the next few sessions, but the market is expected to break below that support area in the near term. The next downside levels to be watched at 10700 in the next 1-2 weeks. The immediate resistance is placed at 11300-11350 for short term.