By Anand James
Will the pain ease?
The break below 20 and 50 SMAs in quick succession followed by a close below 200 SMA on Friday has apparently extinguished hopes of Santa rally and have brought in fears of an extended period of downsides. But, favoured view sees higher prospects of a sideways move with reasonable potential for a pull back. Doing the first phase of consolidation we may re approach the November 21 lows of 23263, but are less likely to break it this week. Rollovers on Friday were the lowest when compared with last two expiries’ similar periods, suggesting that the steepness of the fall may have delayed positioning for next month. At 31%, FII’s longs in index futures are at their lowest this month so far, but we did not see an urgency in liquidation on Friday. Neither did VIX rise alarmingly, all of which suggest that pain may ease in the Christmas week with fair prospects of a pull back in Nifty to 24400. However, it might be too much of an ask for the next week, though history favours a strong close in December usually.
Bank Nifty oversold
Nifty’s same pattern is reflected here as well. The close below lower Bollinger band and oversold oscillators present a window for pull back to 51500, but the initial eyes will be on whether the index will be able to hold above 50500. A direct rise above 50970 will encourage us to pursue the pull back theory while inability to float above 50500 will indicate extended pain.
Nifty PSU Bank index lost around 10% since the first week of December. The index is now exactly at the 61.8% Fibonacci retracement level of November low and December high. 14-D RSI of the index is at 36 and is closing in on the oversold region in the daily periodicity. If we look at the constituent heavyweights like SBIN, Bankbaroda, PNB, IOB, Canbk and Indianb, which forms around 75% of the index, they are trying to make a base around the 61.8% Fibonacci retracement level and the average RSI of these stocks is around 44. All these are hinting at a near term bounce back which could possibly gain pace in the second half of next week.
Realty to see more selling
The Nifty Realty index has been witnessing some volatility near the 1100 level and saw a big bearish Marubozu candle in the daily time frame hinting at more weakness.
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