Bearish bias likely to continue

Nifty continues its corrective waves as it breaks down from a reversal Head and shoulder pattern. The benchmark witnessed the sharpest cut along with selling in the broader market after a long haul as it broke out from a bearish flag while today it was the breakdown from a reversal H&S pattern.

The Short term 20 MA has been down since the 6th consecutive session and that is one indicator that is indicating the bearish bias for some time now. The benchmark closed below the 50 MA after its previous test in May 2021.

This confluence of levels, breaking out of a reversal pattern and closing below crucial short term MAs shows the inherent weakness in the market and its breadth. The other factors also contributed today such as RIL Aramco news; with monthly expiry this week, volatility is just beginning to rise as VIX was up 18 per cent today. Other broader indices also witnessed a sharp cut from 1.5 to as much as 4.51per cent.

We believe this bearish bias may continue with some minor pullbacks. On the higher side, 17,620 – 17,720 are now key resistances while supports are seen at lower levels of 16,700 – 16,850. We maintain a cautious view with a Stock specific approach.

(The author is technical analyst at Finversify)