Dalal Street witnessed a massive sell-off today, and the Nifty closed below the psychological and technical 200 day moving average. All frontline indices were in the red with no respite anywhere in sight. Nifty and the Bank Nifty is expected to trade lower, much lower than the current levels before the current series expires.
The Nifty opened 25 points higher in trade today at 8330.55 and clocked its intraday high at 8334.45, barely 4 points above its open, before weakening. It touched an intraday low of 8202.35 and closed near the low point of the day at 8213.80. Down by 91.45 points or 1.1%. The 8200 put and the 8400 call saw the highest open interest in trade today. The advance decline ratio was negative throughout the day with 1185 stocks declining and 188 advancing towards the end of the trade.
The Bank Nifty opened at 18063.60 and clocked its intraday high at 18075.70 before joining the Nifty on its way down. It clocked an intraday low of 17738.90 and closed towards the low point at 17767.60. A down move of 234.40 points (1.3%). The 17500 put and the 18000 call saw the highest open interest build-up in trade today.
Intraday volatility is diminishing with the India VIX closing 1.93% lower at 18.74 suggesting that the Bears are in a firm grip of the markets.
FIIs were net sellers of 1749.33 crores worth of stock and DIIs were net buyers of 1667.54 crores in the cash markets today.
Technical Analysis – Nifty & Bank Nifty
For the first time in the last 15 months, we saw Nifty breach its 200 day moving average. The decisive close below this level is a strong signal of the worst to come. Investors and positional traders are expected to join the sell-off and book profits and or losses taking the benchmark indices further down. Margin calls will only add fuel to this fire. The day also witnessed some of the leading scripts giving up significant gains, and this is bound to scare retail investors as well.
I was expecting a pullback in both of the indices, and this would have been a good opportunity for us to add further short positions. However, the pullback has not come in, and the chances of a pullback in this series look bleak.
The Ichimoku Heikin Ashi chart of the Nifty suggests further weakness and the trend remains bearish, strongly bearish. The Nifty might see some strong support come in at around the 8050 level followed by 8000 – 7900.
While many believe that the markets might head much below the 8000 level, I am of the opinion that the trend in all probability will reverse at around the 7900 -7920 level. We might see a strong indication of this trend reversal on this Thursday, the expiry day of the current series.
The Bank Nifty as per the Ichimoku Heikin Ashi chart has a long way to cover before we see some signs of a trend reversal. Our open call on the Bank Nifty futures is making good progress, and I expect the counter to fall significantly in the next two trading sessions.