NIFTY – Rational Analysis

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If the NIFTY breaks down below 17,200, we’re staring at a much deeper correction of a further 1,000 points or more. Time for investors to strap on their seat belts. There appears to be some turbulence in store in the near term.

The bellwether index appears to have moved firmly into bear territory over the past 4 weeks, with two failed attempts at breaking past the pivotal 20DMA level. In fact, the NIFTY is testing the lower Bollinger Band level on the daily charts in today’s early trade. 

Paytm’s disastrous debut may appears to have sharply turned around the “devil may care” sentiment that the markets were exhibiting for the past several months; at least for the short term. The beleaguered payments player is down nearly 8% as of today’s early trade; showing that there seems to be no near-term respite for India’s largest IPO. 

Momentum oscillators appear to be weakening as well, with the stochastic firmly making a bearish crossover from the middle of the range. The India VIX has been rising steadily as well, up nearly 50% from its carefree days of June last year. 

The next immediate support appears to be at around the 17,200 level, which marks the 20-weekmoving average. Incidentally, this key technical level has not been breached decisively even a single time since the markets began their wild canter in June last year. 

If the NIFTY breaks down below 17,200, we’re staring at a much deeper correction of a further 1,000 points or more. Time for investors to strap on their seat belts. There appears to be some turbulence in store in the near term. 

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