As anticipated, the NIFTY took support at the 10,000-mark in a truncated trading week, in which the markets remained closed Thursday and Friday.
However, traders should not be quick to turn bullish, as it remains a fact that the NIFTY has decisively broken down past the middle Bollinger band or the wo week moving average mark, thereby ricocheting it into a medium-term zone of uncertainty for now, from a technical perspective.
While the NIFTY has, in the past, resumed its bull run even after breaking down past this critical support level (most recently, towards the end of 2016 when demonetisation triggered a panic selloff), the odds would be more in favour of an extended range bound phase - or even a bearish one - as it the markets struggle to get back on their feet.
The fact that markets closed lower than their opening level last week, making a red candlestick, showed that weakness still exists in the market, and we can by no means expect a canter in the next few weeks.
We're far more likely to see markets trundling up to the middle Bollinger bank over the next few weeks (roughly, 10,400 levels). This is when things will get interesting.
It's only when the NIFTY approaches this critical resistance level, can we establish with any firm degree of confidence that the fears of an extended bearish phase have been allayed.
Investors are advised to tread with caution and not get carried away by temporary upswings. The mood remains cautious, bordering on bearish. A wait and watch approach is called for at the moment.