Trading Plan: Will Nifty 50, Bank Nifty extend selling pressure for third consecutive session?
After two days of steep declines, traders and investors are watching the next possible move of the Indian equity markets with caution. Both the Nifty 50 and Bank Nifty have increasingly been at the receiving end of selling as traders welcome global jitters, profit bookings, and frets or weaknesses within a given sector or market. The burning question is will the third session continue the downtrend?
Market Sentiment Cautious
In general, we are seeing a shift in sentiment. Nifty 50 has fallen below key support levels surrounding 24,200. Bank Nifty is trading below 52,000, explaining much of the weakness by both financials and heavyweights sold off so far alongside rising US bond yields, and global cues and having concerns about oil prices. Making many traders risk averse particularly elsewhere in rate sensitive sectors as well.
Technical Picture
From a technical viewpoint, the Nifty 50 is currently positioned just above its 20-day moving average. If it convincingly breaks below this level, there is significant downside risk, possibly towards 23,900. In contrast, Bank Nifty has displayed signs of relative weakness compared to the broader Nifty index. A convincing break above 51,800 could further accelerate the downside towards 51,200 in the short term.
Nevertheless, some analysts believe the index is getting close to an intraday oversold zone and could see a short-covering bounce should global cues normalize.
What Traders Should Watch
Important domestic triggers will include FII activity, performance of the index heavyweights (especially banks, and IT stocks), and pre-election sentiment. On the global front, any change in US Fed commentary or crude oil prices could cause momentum shifts back or forth.
Intraday traders should sit tight, avoid aggressive long positions, and wait for support confirmation before making directional bets and if they hold their position they may want to consider being tight on stop-losses to lock in profits.
The Bottom Line
In the short term, momentum obviously favors the bears, but markets are known to throw surprises our way. Whether the selling streak extends or a relief rally emerges relies heavily on early word from world markets and opening momentum.
