Expect an extension of corrective move in coming days

By Rahul Sharma

Where are We? The last week kick-started on a positive note as the Nifty opened with an upside gap and rallied by around 2 per cent on Monday. After a positive momentum of first two sessions of the week, the index started correcting. The fall accelerated on Friday and as a result, the Nifty concluded the week with a loss of 0.31 per cent over its previous close. On Friday, the index formed a ‘Bearish Marubuzo’ candle around the ‘200 SMA’ on daily chart.

What is in Store? The index has rallied from the support of ‘200-DMA’ and the ‘Trend line’ in penultimate week and now again came to the same levels. This time, it would be difficult for the index to hold the support level as there is no sign of reversal seen on the chart and FIIs too are selling aggressively. FIIs remained net seller in both cash market and index futures segment last week, which doesn’t bode well for the bulls. Also,

strong writing in 10,200 to 10,500 call options last week suggests a strong hurdle for the index around 10,350 10,400 levels. On the flipside, option data indicate a support for the Nifty around 9,950 – 10,000. Considering the chart structure and derivative data, we are expecting extension in the corrective move in coming days too.

What could Investors Do? Traders are advised to look for shorting opportunities below 10,200 on the Nifty. Bear Spread of 10,200 & 9,800 strikes can be considered to play the ongoing slide. Sectorally, apart from the IT pack, all the sectors are looking bearish. Shorts can be initiated in metals and banking stocks; whereas sell on rise is advised in finance stocks.

(The author is Head – Technical & Derivatives strategy, Centrum broking.)