Weekly Market Outlook for 26 dec to 30 dec

Nifty started correcting from the highs of 18888 registered on 1st December and the correction has intensified in last few days which has resulted in a correction of more than 1000 points in the Nifty from the highs. In last three sessions itself, there has been no respite and the index has corrected sharply to end the week around 17800, with a weekly loss of over two and a half percent.

Nifty Today:

At the start of the December month, the FII’s started unwinding their  long positions in the index futures as the market was overbought post the recent run up of about 2000 points in Nifty. This resulted in a corrective phase for Nifty and after a few sessions, the Bank nifty index too indicated a price wise correction as it breached its ’20 DEMA’ support. In the last three sessions, the selling has been brutal wherein the midcap and the small cap stocks have seen a capitulation. Initial selling by FIIs was more of long unwinding, but in last few days they started forming short positions and they now have more short positions in the index futures. The RSIS oscillator gave a negative crossover from the overbought zone in both Nifty and Bank Nifty and hence, we turned our view negative on the markets when the data became bearish. Now, the Nifty has corrected by 1000 points from the highs and hence, the momentum readings on the lower time frame chart have entered the oversold zone. Also, Friday’s last hour low is around the 50% retracement support for Nifty and around 38.2 percent retracement in Bank Nifty index. So a pullback move from these supports is possible to relieve the oversold set ups. However, until the data changes, the near term trend will continue to remain negative and thus any upmove should just be read as a pullback move. 

Selling intensifies in market as broader market sees capitulation

While 17800 is the immediate support where the index has closed on Friday, if the index continues to correct then the 61.8% retracement support is placed around 17565 on Nifty. On the flipside, the resistances on pullback move will be seen around 18050 and 18175. Traders are advised to avoid aggressive positions and stay cautious till the data turns optimistic again.  

Nifty & Bank Nifty Levels: