Nifty may trade in the 17452-18342 zone

The domestic equity market extended its profit booking and concluded on a deep negative note. The benchmark index NSE Nifty has declined by 443. 25 points or 2.45 per cent last week after a 728.95 points range. It registered the highest weekly loss since March 2021. The benchmark and broader market is a highly volatile whole week. Sectoral front, only PSU Bank index is the sole gainer by 0.1 per cent. All sectoral indices closed lower for the week. Nifty Energy is down by 4.3 per cent is the top loser. The Private Bank Index fell by 3.6 per cent. The remaining indices declined one to three per cent. The broader market breadth is negative as declines outnumbered the advances. FIIs sold Rs.25,572.19 crores in October, which is the highest figure after July this year. DIIs bought just 4470.99 crores in the month. Technically, the market gave an unwavering bearish signal last week. The previous week's Dark Cloud cover got the confirmation as the NSE Nifty closed below the prior two weeks low. On a monthly chart, it has formed a Shooting Star candle. After July 20, the index has formed complete bar below the 20 DMA. In fact, the 20DMA is began to trend down. As we suspected last week, the Nifty extended the losses; after taking support at 20 DMA on Monday, and it bounced on Tuesday and raised the hopes of recovery. But the big players used for a fresh selling opportunity this bounce. During the last week, it exactly reacted from the 161.8 per cent extension level. Interestingly, the index has corrected over five per cent in a month after March 2020 fall for the first time. Though the monthly closing with little gain, the decline from the high is a cause of concern. In any case, in the next three weeks, the NSE Nifty fails to close above the 18,604 points, we can assume the intermediate top is already in place. After 2003, 2006, 2008 and 2014, the RSI has reached 80 zone on a monthly zone. In all occasions, the Nifty has corrected significantly.

By closing below the two weeks low, after February 2021, the index has given caution to the market participants. The big bearish candle shows that the directional consensus has emerged in the market during the week. The immediate support zone is placed at 17,452 (prior swing low) and 50DMA of 17,565. I hope this zone critical support zone can be protected. As 75 minutes chart shows that some of the key indicators are reached to an oversold condition, leading to short bounce. This is only a probability. On the same chart, the downside swing is in the same length of the prior swing. Any sustainable bounce above Wednesday's high of 18342 can give a boost to the bulls and market sentiment. This indicates a probable bounce towards 18063 and 18342 is possible. A decline of 1000 points from the top may give a breather to the bears. As the truncated week, as just three days during the week, and Diwali mood may keep the hopes alive.

The concerns of market direction still exist. The current bull phase ignored many historical facts. Just a liquidity push has driven the market to new highs. For next week, the Nifty may trade between the 17452-18342 zone. Do not expect much activity in either direction. Stay on the light position size. The market may witness higher swings from now onwards.

(The author is financial journalist, technical analyst, family fund manager)