Nifty Cracks Down Below 20 Week Moving Average Mark

The NIFTY took a massive tumble on Friday, falling more than 1.5% in a single trading session. Mid and Small Cap indices cracked too, falling close to 2% each. The Bank NIFTY fell by as much as 660 points in a single session. The major contributors to the negative sentiment were dashed hopes of a change in FPI surcharges, as well as continued concerns on asset quality. Tepid corporate earnings contributed to the carnage.

Today’s weak opening confirms the negative trend which was first signalled by the markets in the first week of July when the index made a lower top, with the index decisively breaking down below it’s 20 Week Moving Average mark for the first time since September ’18. The 20WMA has traditionally served as a strong support level during bullish periods.

Traders will now watch with bated breath as the index hurtles towards its lower Bollinger Band level, which appears to be forming somewhere around 11,200 – 11,225 levels. With the NIFTY firmly entering oversold levels on the weekly charts at these levels, there’s a fair chance that the it will find its feet around the 11,200 mark. Deeper concerns will begin to creep in if it tests in May pre-election lows of 11,100 – 11,150, which seems unlikely at this time.

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