Nifty in do-or-die situation; the trend is clearly bearish

Special to Firstpost

CNX Nifty (5,508.85): The anticipated counter-trend rally materialised during the week and the Nifty went within striking distance of the target of 5,800-5,850 mentioned last week. After touching a high of 5,754 on Wednesday, the index cracked sharply on Friday and closed on a distinctly weak note.

[caption id=“attachment_1040767” align=“alignleft” width=“380”]  Nifty daily chart. Firstpost.[/caption]

Despite the fall on Friday, the Nifty has not yet breached the major swing low of 5,477, which is the only consolation at the moment. A fall below this level would suggest that the next leg of the downtrend to 5,250-5,300 is underway.

Technically, the Nifty is in a do-or-die kind of situation and the bullish camp may expect some respite only if there is a quick turnaround from current levels. Else, the path of least resistance would be on the way down.

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As always, it would make sense to let the price makes its intention clear before deciding the next course of action. A rebound from current levels would mean that the recent recovery is not yet over and the index could take a second shot at the resistance level of 5,800-5,850. On the other hand, a fall below 5,477 would have negative connotations.

Bank Index (9,450.85): As observed in the week before, the Bank Index holds the key to the short-term trend in the Nifty. A look at the technical set-up in the bank index does not exude much confidence. The trend in this index is distinctly bearish after Friday’s breach of the support at 9,600.

The index could now slide to the support at 8,460-8,500. The bearish view would warrant a review only if the index moves above the resistance at 10,300. There are visible signs of weakness in the FMCG and IT indices, which have managed to shore up the Nifty in recent times. Taking into account these sector indices, there seems to be a strong case for the fall in the Nifty to continue.

**Titan Industries (Rs 240.60):**The sharp rally in recent weeks was arrested at the key resistance in the Rs 285-290 range. The steep fall on Friday suggests that there is lots of selling pressure at higher levels. The short-term trend is bearish and the stock could slide to the Rs 200-210 range.

Investors may reduce exposures in the stock and contemplate a re-entry on evidence of support near the Rs 200-210 range. A fall below Rs 200 would have major negative implications and the stock could then slide to the major support at Rs 175-180.

**Bata India (Rs 878.20):**This stock too has faltered at crucial resistance and turned weak on Friday. The short-term outlook is bearish and a fall to the immediate support at Rs 725-730 appears likely.

[caption id=“attachment_1040769” align=“alignleft” width=“380”]  Bata India-Daily Chart. Firstpost.[/caption]

Investors may take profits while active traders may consider short positions with a stop-loss at Rs 940 and target of Rs 730. Any pullback rally may be used not only to reduce exposures but also to initiate short positions.

(The views and recommendations featured in this column are based on a technical analysis of historical price action. There is a risk of loss in trading. The author may have positions and trading interest in the instruments featured in the column.)