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Carnage on the d street as nifty went below 17000 mark. All the sectoral indices ended in the red with auto, metal, IT, power, pharma, realty, FMCG, capital goods down 2-6 percent. BSE midcap and smallcap indices fell 4 percent each. The Nifty opened on a negative note on January 24 & witnessed sharp follow through selling. The selling pressure intensified as the index breached the recent Doji pattern’s low of 17485. In terms of the Fibonacci retracement, the index has done deep retracement of the Dec – Jan rally. Market corrected massively, possibly reacting to US equities trending lower and rise in crude oil prices. In my view, there were no positive triggers to take the market upwards in the near term and which is why volumes in large cap names are down 20-30% in 2022 so far, as compared to 2021, even when market caps are higher by 20-25% on a year-on-year basis. While a further 500 points downside cannot be ruled out in the Nifty, on the brighter side, the stock market is much lighter and healthier, heading into the Union Budget, after the high in mid-October 2021. Corporate earnings have been positive so far and Omicron didn’t disrupt the economy materially. The structural story remains intact and I am confident that Nifty will achieve a higher high in 2022, than what we saw in 2021. At close, the Sensex was down 1500 points at 57491, and the Nifty was down 468 points at 17149.
We expect volatility to remain high as investors await the
Fed meet outcome. Moreover, pre-budget jitters, earnings announcements and
upcoming monthly expiry would further add to the choppiness. Traders should
limit leveraged positions in the current scenario and focus more on risk
management. Investors, on the other hand, should see this correction as an
opportunity to buy quality stocks at a good bargain. The selling pressure
abated near the daily lower Bollinger Band, which is near the key psychological
mark of 17000. The index attempted a bounce thereon & closed near the 61.8%
retracement mark. Thus going ahead 17000 will be the key level to monitor on a closing
basis. Unless that breaks on a closing basis the index can go for a bounce
& can test a falling trendline near 17500.
Resistance: 17200, 17300, 17400
Support: 17000, 16900, 16800
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