Going ahead, a breach of 11,100 would lead to an immediate correction towards 10,975 – 10,875 in Nifty.
Due to modest recovery towards the fag end, Nifty concluded the week gone by a tad below 11,200, marking more than a percent loss on last Friday.
Friday’s correction was no surprise to us as we have been consistently advocating caution in our intra-week commentary as well as in the previous weekly report.
The range of 11,300–11,350 is considered to be a sturdy wall, firstly, because it is the 78.6 percent retracement of the entire fall from 12,430 to 7,511.
Secondly, the 100 percent ‘price extension’ of the first up leg (7511.10 – 9889.05) from 8,806.75 precisely coincides around 11,300-11,350.
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 11,100 would lead to an immediate correction towards 10,975 – 10,875.
Here, 10,875 would be seen as 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 11,100.
Throughout last 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 last Thursday and the index obliged to our view.
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.
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