“The recent decline has disrupted the positive momentum, with Nifty falling below its crucial short-term moving average, the 20 DEMA. A decisive break of the 22,400 level could trigger a further drop to the 22,000-22,150 zone. We suggest aligning trades accordingly and adopting a hedged approach,” Ajit Mishra, Senior Vice President, Research at Religare Broking.
What should traders do? Here’s what analysts said:
Jatin Gedia, Sharekhan
Nifty witnessed a gap down opening and continued to drift lower during the day to close around the lows for the day. It closed in the negative down ~216 points. On the daily charts we can observe that the Nifty is in the process of retracing the rise it has witnessed 22,054–23,111. The Nifty has now reached the support cluster of 22,460–22,500, where support parameters in the form of the 20-day moving average and the 50% Fibonacci retracement level are placed. We expect the Nifty to hold this crucial support zone and start the recovery process. In case of a breach the next support is placed at 22,313–22,300.
Rupak De, LKP Securities
The Nifty has remained volatile during the session with predominant bearishness. The sentiment for the short-term remains weak as the index slipped below the critical 21-day Exponential Moving Average (21EMA). Call writing activity was significant at 22,500. Therefore, to witness a meaningful recovery, Nifty needs to sustain above 22,500. However, failure to move above 22,500 might attract fresh selling in the market, potentially driving the index towards 22,300/22,100.
Ashwin Ramani, SAMCO Securities
The long short ratio (LSR) of foreign portfolio investors (FPIs) fell to 49.50% on May 29 from 53.96% on May 28 as they liquidated some existing long positions in Index futures. The Put-Call ratio (PCR) known as the sentiment indicator, has fallen to 0.52 at the close on Thursday, indicating call writers’ dominance. Five trading sessions back the PCR had made a high of 1.34.Nifty has given a consecutive lower close (close below previous day low) on the daily chart. Strong call writing which is a mark of bear activity, was observed at the 22,500 Strike in Nifty. The call writers still have sizable positions at the 22,500 Strike and the option activity at this strike will provide cues about Nifty’s future direction.(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)