Some respite at 200-SMA, but still not out of the woods yet: Angel Broking

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

"We started the week on a flat note as there was no major development over the weekend on the domestic as well as global front. But all of a sudden, the global markets started feeling the heat and had a rough afternoon on Monday. Undoubtedly, this negativity had a rub off effect on our market and as a result, the Nifty took a nosedive in the latter half to shed more than 200 points. This development set the tone for the remaining part of the week and market extended losses in the following sessions to conclude one of the worst monthly expiries in the last six months. On Friday, fortunately we had a smart recovery to defend the 11000 mark on a weekly basis.

Barring the last day of the week, our markets kept grinding lower and didn't respect any intermediate support in the process. The velocity at which the market came off this week, it might have caught a lot of traders on the wrong foot. But honestly speaking, we were not surprised with it and with reference to our recent articles; we have been repeatedly advocating caution in the recent rally. The way prices looked overstretched, reaching a cluster of multiple Fibonacci ratios/ key indicators and importantly the positioning of US Dollar index recently, we avoided participating in the last phase of the recent euphoria. And yes, when the euphoria reaches complacency, the market eventually tends to show its supremacy. We had a couple of hints in the previous three weeks but who ignored it, had to pay the price. Without boasting further, the cautious stance initially and then a 'Sell on rise' has played out well so far.

This is past now but the important question is what's next and is there further room for the market to correct? In our sense, the market is not done yet and although we have seen a smart broad based recovery on Friday, we expect the selling to re-emerge at higher levels around 11150 - 11250. On the daily chart, we can see a confirmation of 'Lower Top Lower Bottom' for the first time since May lows. Hence, the probability of Nifty sliding below 10820 - 10770 is quite high to test the next cluster of supports around 10600 - 10450. However, with a broader view, we still believe that this is just a corrective phase within the large uptrend and thus, it is likely to provide a very good opportunity to accumulate quality propositions in a staggered manner. But for momentum traders, it's advisable not to get carried away by in between bounce backs as we are still not completely out of the woods."

Source : Equity Bulls

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