Nifty Daily & Weekly Update 22nd Sept 2017. Surprise ! Surprise ? Nifty came tumbling after

BIG PICTURE Week and Day Ending Sept 22nd

The Nifty had the biggest daily fall of 2017 on Friday. The market displayed symptoms of bi-polarity, as Monday was a day of Euphoria and Friday it was deep in the dumps.

On Monday Nifty managed to open gap up and break the life time high to create a new High. It sent the technicians back to the drawing board to re-draw the trendline. Then there was a drag in the next 3 days of the week. The lack of follow up day, the three bearish candle that followed Monday did indicate the Bulls were involved in a close battle with Bears and not really in control at the top. And Friday the big whack and fall came. Friday's fall was much bigger than anticipated. It broke multiple support and closed at 9964.40. The fact that it followed a hammer pattern on the prior day added to the surprise element. 

The bears started with a morning attack and it was relentless as if the Bulls had fled from the field. Nifty opened gap down by 27 points and managed to go up only 0.70 points (which was the day's high). For all practical purposes Open = High day, which would have meant that probably countless trading strategies generated short signals. No wonder that the market witnessed continuous selling pressure throughout the day as more traders joined the bear run. The fact that the Nifty closed above 9950 is a small saving grace. Monday's open, as usual, will be a key event to watch. Expiry week will also mean that there is a lot at stake on how the next week pans out. 

Getting back to the Friday's study, all sectors ended in Red and all broad based indices ended in red. Realty and Metals were the biggest losers losing above 4% in the day's trading. IT was spared from the carnage as it lost only 0.2% on a day that Nifty fell by 1.56%, Midcaps50 by 3.15% and Smallcap100 by 3.14%. The advance decline ratio was 1:7 ... only about 200 shares rose while rest closed in red in the trading session. 

Even on such a day, 34 securities managed to reach 52 week high while 21 securities reached 52 week low on Friday.

On the daily charts the Index has taken support near the 50 day SMA while the weekly charts it is trading well above all key moving averages. The daily RSI has slowed down to below 50 while the weekly RSI is quite bullish above 60. While the daily fall was the biggest, the weekly fall was not as bad as the fall a few weeks back. The week of 7th Aug saw a fall of 400+ points while the week of 18th Sept witnessed a fall of 226 points, out of which 150+ points was on Friday. However the candle pattern tells a different story as you will read in the next section.

The attached weekly chart shows the weekly movement visually.

WEEKLY CHART

CANDLE STICK ANALYSIS

• The daily candle was a long bearish candle with a really tiny upper shadow of 0.7 points and a small lower shadow of less than 12 points versus the day's range of 142.25 points. In short, a very strong bearish candle.
• Volumes was close to 11.9K crores versus 11.1K crores on Thursday.
• The daily candle has closed the gap that was created on Monday and showed an increase in the bearish momentum. 
• It took support at the 50 day SMA (for the 5th time this year). The frequently repeating testing of 50 Day SMA for the Nifty is definitely indicating early signals of slowing down of the bullish momentum.
• The weekly chart candle pattern is one of Bearish Engulfing. The body of candle for this week is bigger and of opposite colour of the candle of last week. Last week was a bullish candle with shaven bottom (no lower shadow) and small upper shadow. This week, the candle again has a very small lower shadow but bearish indicating a complete reversal in the market sentiment. 
• The placement of this engulfing two candle pattern at the top of the chart indicates an upcoming correction in the near term.
• This candle has now given a good reference points for bears to put their stops. We can expect another round of tussle between the Bulls and the Bears in the expiry week. 

DAILY CHART

INDIA VIX AND NIFTY OPTIONS DATA 

• The India Vix rose by a whooping 10% indicating highly bearish activity. It opened at the same level as prior day but quickly rose in response to the bearish sentiment and stayed close to the top of the range throughout the day.
• The Nifty PCR has fallen below 1 to 0.95 indicating a complete reversal in sentiment of the option market. 
• The volumes were very high with 2 million puts and 2 million calls traded in the session on Friday.
• 9900 and 10200 remain the support and resistance strike prices for Nifty for the expiry.
• A short buildup on the call side was about 7.3 million between 10000 CE and 10200 CE (5 strike prices) indicating highly bearish sentiment. Short build up in 3 ITM Strikes of 9850 to 9950 was also witnessed. 
• There was long unwinding to the tune of 6 million puts at Put Strikes of 9800, 9900, 10000, 10050 and 10100. 
• Short covering seen at Put strike prices of 9850 and 9950 to a smaller extent. 
• The long unwinding of Puts indicate that some participants feel the market is at support and they do not expect the market to go down any further and hence exiting their puts. 
• The shorting of the calls indicate bearish sentiment above 10K levels. 
• Overall is seems like the market may range between 9900 and 10K levels based on Options data. 

OUTLOOK FOR 25 Sept

25th Sept Nifty Range 9946 to 10071 with support at 9920 and resistance at 10115

25th Sept BankNifty Range 24241 to 24501 with support at 24048 and resistance at 24567.

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This blog is for educational and awareness purpose only. The views are intended for discussion and exchange of views rather than an expert opinion. This is not an recommendation to buy or sell or invest in the stock market and derivatives market. Kindly exercise caution and perform your own due diligence before investing in the market, after fully and clearly understanding the risks involved.