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This week witnessed a sharp cut in the Indian share market. The benchmark index ended this truncated week 518 points or 2.57% down to 19,674.25. Except for the index, no sector was able to hold its ground. The last time we had seen such a big fall on a weekly basis was in February 2023, of 2.67%.
However, the big question is, will the market recover in the next week or bears will continue to pounce harder?
Image Description: Daily chart of Nifty 50
Image Source: Investing.com
Looking at the daily chart of the index, the next support is present at around 19,584. This is the same level that signaled an uptrend when Nifty started rising in the first week of September 2023. On the way up and down, there haven’t been any halts taken by the index, therefore the major support remains the same which was the resistance earlier.
This means, there’s still some downside potential of 90 points which isn’t much of a big deal. Traders who are already short on the index can now tighten their stop losses to protect the majority of the gains.
Despite a 2.57% cut in the index this week amidst a one-way fall, it should not be deemed that it has become oversold. The index has only lost around 50% of the gains of the preceding rally and is in no way near a bottom.
However, as the support of 19,584 is close, investors can expect a bounce back from around this level. As we still have a 90-point downside potential, those looking to capitalize on a counter-trend trade should make sure their stop loss level is below the current support.
Disclosure: I have multiple positions in Nifty 50.
In case you want to connect with me, reach out on X (formerly, Twitter). My handle is – aayushxkhanna
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