AAKASHAYA PATRA WEEKLY MARKET OVERVIEW: 05.09.2020

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After many weeks of hibernation, Bears made a comeback. The first blow was landed on Monday when the Nifty made a very big black body candle which completely engulfed previous six days of upward candle. The week ended on a weak note as Bearish Engulfing pattern got completed on the Weekly timeframe. After several failed attempts by the Bears, formation of Weekly Bearish Engulfing indicates start of the much awaited Correction. There is a possibility of the Nifty testing the 50dma (11096) and 200dma (10808) which are accompanied by higher bottoms at nearby levels. Only a close above Nifty 11794 can negate the Bearish Engulfing

Technically Speaking :-

Sensex opened the week at 39888, made a high of 40010, low of 38249 and closed the week at 38357. Thus it closed the week with a loss of 1110 points. At the same time the Nifty opened the week at 11777, made a high of 11794, low of 11303 and closed the week at 11333. Thus the Nifty closed the week with a loss of 314 points.

On the weekly charts, both the indices have formed a Bearish Engulfing pattern. This is a Bearish Reversal Pattern and it assumes significance as it is forming at the top of an Uptrend. On the daily charts, both the indices formed an Inverted Hammer on Friday after opening with a Gap down. This can be Bullish Reversal pattern but it requires confirmation. Thus Weekly Candlestick study indicates a Bearish Bias in the near term.

On Friday the indices went down creating a Bearish Falling Gap between Sensex 38729-38943 and Nifty 11452-11507. This Bearish Gap will now act as a Resistance going forward. The current

Correction can end only if we have a weekly closing above Sensex 40010 and Nifty 10794 which is the failure point of the Bearish Engulfing pattern.

The indices are in a Trading Range between Sensex 36700-40000 & Nifty 10800-11800 and are now in a downward drift. The bearish momentum suggests a move towards the lower boundary of this trading Range. Indices will find Support at the first Support Zone at Sensex 37654-37643 and Nifty 11111-11096 defined by the confluence of higher bottom and the 50dma. Second Support Zone at Sensex 36911-36742 and Nifty 10882-10808 will be a stronger Support as it is due to the confluence of higher bottom and the 200dma.

Both the indices breached and closed below the Short term average of 20dma (Sensex – 38612 and Nifty - 11402). Both the indices continue to remain above the Medium term average of 50dma (Sensex - 37643 and Nifty 11096) as well as the Long term average of 200dma (Sensex – 36742 and Nifty - 10808). Thus the Trend in the Short term timeframe has turned Bearish whereas the Trend in the Medium Term as well as Long Term Timeframe continues to remain Upwards.

MACD as well as Price ROC both are in Sell mode. RSI (51) suggests a minor tilt towards bullish momentum. Stochastic Oscillator %K (47) is below %D and hence in Sell mode. ADX (26) suggests Up Trend has lost considerable strength. Directional Indicators have seen a Bearish Crossover as +DI went below -DI and hence in Sell mode. MFI (66) suggests Positive Money Flow. OBV continues in Buy mode. Thus majority of Momentum based Oscillators are suggesting a Bearish bias. Options data for September series indicate highest Call Open Interest at the strike of 11500.

Highest Put build-up is at the strike of 11000. Thus Options data suggest a trading range with Resistance @ 11500 & Support @ 11000.


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