Market to witness bearish stance for the short term

Both the Nifty as well as Bank Nifty index corrected last week without any pullback move as the broader markets witnessed selling pressure. Nifty breached the Budget Day low on Monday and the broader markets too saw a sell-off, but the Banking index witnessed some strength and ended the day with gains of a percent. 

Both the Nifty as well as BankNifty index have already witnessed a sell-off in the last 6-7 trading sessions without any pullback move. FII’s have rolled over their short bets in the index futures segment to the March series as well and they have over 80 percent of the positions on the short side at the start of the new F&O series. This indicates their bearish stance for the short term. However, although the momentum oscillator on both Nifty as well as Bank Nifty daily charts is in sell mode, it has reached the oversold territory on the hourly charts. The Banking index started a pullback to relieve the oversold setups on the daily chart, and it has managed to defend last Thursday’s low of 39600 where we witnessed the formation of a ‘Doji’ candlestick pattern. Nifty has formed a ‘Hammer’ pattern around the previous low support which is a reversal pattern. Also in the options segment, the Banking index witnessed some unwinding in call options in Monday’s session while the addition was seen in puts of 40000 strike. Looking at the above data and levels, it seems that although the data and momentum are negative, the risk-reward is not favorable for new short formations here due to an oversold setup. Thus, a pullback move is possible in the next few days to relieve the oversold setups. 

However, considering the weakness in the broader markets and some sectoral indices, we are likely to see some sector rotation where some of the sectors would continue to underperform while certain heavyweights could see an up move to pull indices out of the oversold zone. Hence, traders are advised to look for stock-specific opportunities for the short term. The immediate support for Nifty is placed in the range of 17300-17200 while resistances are seen around 17570 and 17700.