Subash Gangadharan, Senior Technical and Derivative Analyst, HDFC Securities
Markets witnessed a healthy bounce back on Thursday after a sharp selloff seen on Wednesday. Nifty gradually climbed during the session after a weak opening. Nifty finally gained 104.9 points or 0.5% to close at 21,255.05. Broad market indices like the BSE Mid Cap and Small Cap indices gained more, thereby outperforming the Sensex/Nifty. Market breadth was positive on the BSE/NSE.
Zooming into the 15 min charts, we can observe that the Nifty has bounced back smartly on Thursday. But the negative moving average crossover seen on Wednesday is still intact as the 20 period MA remains below the 50 period MA on the 15 min chart. The Nifty is also near the 50 period MA which could provide resistance in the very near term.
On the daily chart, while the Nifty has bounced back sharply and retraced some of the losses seen in the previous session, the short-term trend remains down.
Momentum readings like the 14-day RSI too remain in decline mode and declining sharply from overbought levels on Wednesday. This is a negative signal for the near term, and it also implies that the Nifty remains in a short-term downtrend.
Nifty would need to cross the recent highs of 21593 to reverse the current downtrend. Crucial supports to watch for re-emergence of weakness are at 20976.