Investors Need To Be Cautious As Market Under Pressure

The sea-saw moments during the last week resulted in a flat closing. With two sharp sell-off spells from the highs, the benchmark indices failed to move higher. The Nifty finally closed with 40.50 points or 0.35 per cent during the last week. The BSE Sensex lost 0.2per cent. The outperformance of broader indices continued. The Nifty Midcap-100 and Smallcap-100 indices advanced by 3.8 per cent and 6 per cent respectively. On the sectoral front, pharma and IT indices gained by most with 8.9 per cent and 6.4 per cent respectively. The Financial services index and PSU Bank indices fell by 4.5 per cent and 3.9 per cent respectively. Overall market breadth is slightly negative. Barring one day, the FIIs continue to buy, and the DIIs sold the equities last week.

The Nifty took support 20DMA for at least three times during the last week. It filled the gap of September 4. On the weekly chart, it formed a small body candle. The net distribution days at the end of the week are six, as one added and one is expired. The uptrend since March low is now under pressure as the momentum is waning. Even though the Nifty has not made any lower since then, the high is not so convincing. Last Wednesday's high is important for the ongoing trend. Around 11,620 levels, the Nifty faced the resistance several times in the recent past. The 20DMA is almost flattened, is an indication of consolidation mode and the sideways action to continue. The Nifty is also forming a pattern similar to head to shoulder after bottom formation on August 3. In any case, if Nifty fails to move above 11620-11690 range, we expect a dip toward 50DMA at 11,281. There are several supports at around this level. There trend line support around 11,380 and gap support on September 10 also placed. As the distribution day's count is on the higher side, fall below 50DMA can be categorised as a downtrend.

The Kaufman's Adaptive MA's support is placed at 11387. This KAMA is flattened from a rising staircase, and any turn will signal the reversal from the current level. The 30EMA support is at 11377. These many supports must hold for a continuation of the uptrend. In any case, bulls able to take the Nifty above 11618 and 11690 resistance zone, then the uptrend will resume. The Daryl Guppy's MMA setup indicates, the current is in danger at the set of short term averages are flatten and some of them are turned down too. For the first time RoC has reached below the zero line, and Martin Pring's KST shows the index. The RSI is failed to sustain at 60 levels and forming another downward channel. The divergences are still there in most of the indicators.

In a nutshell, the 11,620-11690 on the top and 11440 - 11370 zone will act as a support and resistance for the next week. In case of breaching 11281- 11185 zone is a sign of trend reversal and will enter into a downtrend. As the market trend is under pressure, it is better to be with a cautious approach for now. Focus on the stock with strong fundamentals and the good technical structure to build the portfolios.

(The author is a financial journalist and technical analyst. He can be reached at [email protected])