In the midst of a global sell-off, the ended Friday’s session on a weak note, falling 1.72% to 17,327.35. As the index closed near its low, the weakness was expected to continue in the next session. However, the overnight plunge in the US markets led by increasing fears over a global recession took a heavy toll on the which continued the downward momentum and broke the crucial level of 17,200. The SGX Nifty fell to a low of 17,127 on Friday, although some buying from the lower levels helped in a slight recovery and the index closed at 17,215.
Now, the opening session on Monday is sure to welcome investors with a noticeable gap down. So far in September 2022, whenever there had been a gap down opening, the buying from the lower level had supported the markets. This price action also denoted a range-bound market wherein selling from the higher levels and buying from the lower levels kept the markets oscillating within a broad range.
Image Description: Daily chart of SGX Nifty
Image Source: Investing.com
However, the last level of 17,200 is a crucial one. If the market sustains below this level, then the next major support which cloud be seen on the screen is 16,800. This is not a one-day or a week analysis. This level could come on the screen by the October 2022 expiry. As indicated in my previous analysis, the broader strategy has now changed to a sell-on-rise and Monday’s fall would further confirm this trend. Buying on dips might not be an ideal strategy from here on.
However, this should not be assumed as a one-way fall till 16,800. The market moves in waves and therefore a retracement from the current levels on the upside could easily come. As the benchmark index has taken a serious hit in the last two sessions and Monday would be the third one, a bounce back should not be surprising for traders, but all bounces are seemingly a selling opportunity till at least the Nifty changes its structure from a lower low and lower high to a higher low and higher high.
How far the Nifty could bounce back? The bounce could easily be witnessed till 17,500. However, looking at the value of over 20 and the highest closing in 2.5 months, the volatility is surely coming back and therefore the bounce could be even higher. But the conclusion is, this correction might not be just a part of the previous rally, but an altogether trend reversal.