Nifty Breached 50-DMA and formed ‘’Bearish Flag Continuation” pattern on the daily chart.

The market moved almost as per our expectations as we have mentioned in our monthly report published on November  04 as well as mentioned in previous couple of webinars “Bazaar Pe Charcha”. It remained volatile from the second half  of October and traded with negative bias.  
 

 
At current juncture, the analysis of the weekly & daily charts depicts the following:  
 

• The index has lost around 1.90% in the last week and formed a bearish candle on the weekly chart. And the struc ture of the last four week candle would be considered as a bearish candlestick pattern. Hence, the chart plotted  on the weekly time frame indicates a sign of bearishness as slope of the RSI indicator has downward along with  negative crossover as well as negative crossover on weekly MACD. Apart from RSI and MACD, another technical  indicator ADX on the weekly chart also indicates a pause in current ongoing up-trend as slope of ADX has turned  downward along with DMI (directional moving index) divergence. 

 

• Likewise on the daily chart, the index started trending in negative trend and as it has breached the key level of  50-DMA along with ''head & Shoulder'' pattern formation and breakdown below its neckline as well as “bearish  flag continuation” Pattern. The momentum indicator RSI has now started trending in bearish territory after form ing a double top light pattern around 55-56 along with negative crossover on MACD. 

 

• On the options data front, PCR for monthly contracts expiring November 25 stands at 0.65. From the OI data  perspective for monthly contracts expiring November 25, maximum Call OI built up was seen for 18,000 strike  price, followed by 18,500 strike price, which amounts to 115.21 lakh contracts and 81.87 lakh contracts, respec tively. Likewise, maximum Put OI built up was seen for 17,500 strike price, followed by 17,400 strike price, which  amounts to 60.71 lakh contracts and 58.25 lakh contracts, respectively.  

 

• Further, as per O’Neil methodology of market direction, the current market is in a “Confirmed Uptrend” with five  distribution days in the last 25 trading sessions. However, the index has already breached 50-DMA and the  number of ' ‘’D days’’ is now elevated to five, we may downgrade the market condition from “Rally to Uptrend  Under Pressure” in the coming trading session(s). 

 
Summary: All the above-mentioned multi-timeframe technical parameters, along with the O’Neil Methodology of  market direction, indicate the index has now entered into a short to mid term correction phase with negative bias. And  it may remain traded underpressure until it is trading below 18,300- 18,400 levels. Further, analysis of daily time frame  charts indicates negativity which may accelerate the market in downward trajectory.  
 
We expect the index may remain traded with negative bias as implications of bearish flag pattern as well as Head &  Shoulder pattern suggests around 800 - 1000 points fall from current level. Hence, we expect sustainable trading  below 17,800 - 17,850 may, slowly and gradually, lead the market towards 17,000 - 16,800 levels in the coming few  weeks. 
 
Apart from Nifty50, sectors like IT and Realty are trading sideways with negative bias and Banking, Metal and Pharma  indicates comparatively more negativity. However, the sector like Auto index shows resilience in the current phase of  market condition.
 

FII/ DII Activity in the Third Week of November

 

 

Current Status of Major Sectoral Indices - Per O’Neil Methodology

 

 

Current Status of Major Global Indices - Per O’Neil Methodology

 

 

TraderSmith performance chart