Weekly Market Outlook for 19th September to 23rd September

Our markets recovered smartly on Wednesday post the gap down opening, but the index corrected in last couple of trading sessions and as it broke the important support of 17700 on the last trading session, we witnessed a sharp sell-off to end the week above 17500 with a weekly loss of more than one and a half percent. 

Nifty Today:

Nifty was trading within a ‘Rising Wedge’ pattern post the recent recovery in Wednesday’s session. The index broke the support end of the pattern with a gap down opening on Friday and then it even broke its important ’20 DEMA’ support of 17700. Once that was broken, the trend changed and the index entered a corrective phase again which resulted into a selling pressure throughout the day to test the 17500 mark on Nifty. The momentum readings on the hourly charts were already in a sell mode and the the negative crossover from the overbought zone on the daily chart too indicates that the short term trend for the index has turned negative. In the coming week, we could see some further sell-off but in between recovery cannot be ruled out as the hourly readings are approaching oversold territory. In case of any pullback moves 17770-17820 will now be seen as a resistance zone and thus any upmove towards this resistance should be used to lighten up positions. The near term supports for Nifty are placed around 17350 and 17100.

Nifty breaks important supports and enters corrective phase

Amongst sectoral indices, the Bank Nifty too corrected by a percent on Friday but the broader trend has still not turned negative for the banking index. Hence, a relative outperformance could continue in this sector. But for this index, 40300 would be seen as crucial short term support. The Dollar Index has been rising again post US inflation numbers on Wednesday. This would be negative for the equities and until we see a reversal there, the risk of a sharp correction in the short term is likely to remain high.