NSE Nifty slumped for a seventh straight session on Monday, as market sentiment took a hit after two new coronavirus cases were confirmed in India.
The domestic stock market made a positive start and the index moved past the 11,400 level in the early trade.
However, the headline index reversed course in the second half and lost over 350 points in an hour.
It finally settled 69 points or 0.62 per cent lower at 11,132.75.Mondays session saw the volatility index, India VIX, spiking by 8.74 per cent to the 25.20 level.The market on Tuesday is expected to try and find a temporary bottom.
Fresh Covid-19 cases in India might fuel a negative sentiment in the beginning, but the oversold nature of Nifty on the short term charts, will help in a technical pullback.
The index is likely to stay volatile.Tuesdays session is likely to see 11,165 and 11,255 levels act as resistance.
Support may come in at 11,036 and 10,965.The Relative Strength Index (RSI) stood at 23.56 and made a yet another 14-period low, which is bearish.
However, the indicator did not show any bearish divergence against the price.The daily MACD stayed bearish while trading below its signal line.
A large black body was formed on the charts.
The size of the body signifies the intense selling pressure that Nifty sustained in the last hour and half of the trade.As per pattern analysis, Nifty has created a gap between 11,400 and 11,550 levels.
This zone will act as a very strong resistance unless it gets filled up going ahead.
Also, the index has drawn its expected trading range lower in the 11,050-11,400 zone.
The index has a key double bottom support to look at near the 11,000 level.If reactions to the coronavirus outbreak stay small, then a pullback attempt cannot be ruled out.
However, in the event of a continued correction, we would strongly recommend traders to avoid fresh short positions, as short term indicators are deeply oversold.We would recommend staying light on positions and keeping a highly cautious view on the market.(Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founder of Gemstone Equity Research - Advisory Services, Vadodara.
He can be reached at milan.vaishnav@equityresearch.asia)