seekedge - blogs: More corrections ahead ? Weekly Market Analysis : October 4 2021

Nifty formed Weekly bearish candle (nearly a dark cloud cover) with ~3% fall from an all time high and later recovered only ~0.5% up

Bank Nifty also formed weekly bearish candle with ~4% fall from all time high and later recovered only ~1% of it.

Latest nifty daily candle is a indecisive dragonfly doji candle during a downtrend may suggest a reversal to upside if confirmed.

while bank nifty latest candle is a hammer candle at a support which could be signalling presence of bulls and may be reversal to upside if confirmed.

Nifty & Bank nifty has moved away from the upper band and slipped from the median moving band 20 moving average.

The nifty resistance would 17600-17650 and then 17950/18000 while previous support levels at 17350-17450 and 17250-17300 levels swing low levels and below that at 17000-17150 levels.

Bank nifty now has resistance near 37700-37800 and then 3800-38100 and below supports are at 36900-37100 and then 36300-36500 and near 35600-35900 level below it.

Both Nifty & Bank Nifty lost some of the momentum and slipped into sideways on all daily timeframe while weekly and monthly remain bullish.

Bank Nifty has momentum bullish reverse divergence on weekly while same may work out on nifty daily timeframe.

Nifty & Bank nifty met target of last week identified bearish momentum divergences on daily

Nifty & Bank Nifty ADX trend indicator crossed over to bearish zone with ADX trend strength falling on daily timeframe while trend still bullish and rising on weekly and monthly timeframes as well.

Open interest data for Nifty showing long unwinding & Bank nifty also showing a long unwinding based on the futures contracts.

Highest options call writing for Oct 7 weekly expiry is seen at 18500 with 18000 also seen having more writing while 17500 levels shows highest support point for nifty with 17400 support is next highest support.

Bank-nifty options open interest data shows highest call writing at 38000 and 40000 levels while highest put writing seen at 37000 and 36000 levels that could act as support for the expiry

Put call ratio for nifty accordingly is seen 0.71 which is not bullish while 0.72 for bank-nifty is not bullish.

The Nifty IV 16.2 is above HIV 9.6 and IVP at 32% levels which seems outside of very low volatility regime and forming new range.

IT sector corrected near 7.25% last week after previous week ending gravestone candle and bearish divergence worked for reversal as signalled previous week..Dollar strength has broken out and moving up and work from home continues and therefore sector may not correct much but need wait for the sideways slipped momentum to catch up.

FMCG corrected near 3.3 % last week and formed a dragonfly doji that is indecisive and daily momentum slipped and expectation is that the up move in this defensive sector is likely to continue but need wait for slipped momentum to catch up..

Metal moved up > 2.5% after the bounce back hammer earlier week and bullish reverse divergence on weekly is seem to be working and stock could be picked up if it sustains the momentum coming week.

Auto sector moved further up than ~4% but gave up at settled with ~1.5% move last week and continue gained short term momentum with price above the support zone but weekly momentum on the edge of bullish zones on medium term and may need wait for it to catch up little bit more before picking stocks as index seem to be heading towards a double bottom resistance before breakout on weekly.

Pharma sector moved up more than 2% last week and climbed to bullish zones on short and medium term and formed a hammer pattern but has immediate resistance above would need momentum to sustain back and price to move above the resistance on daily in order to looks at stocks in the sector

Reality moved up much but gave up to settle with ~1.5 % up move is having a weekly cup and handle breakout pattern in progress and last two week believe it or not it made 30% up move ..Sector is bullish in momentum and trend on all timeframes and time for stock picking for long entry.

US markets all of the indices closed red while previous week was a bounce from to fed meeting outcomes.

Dollar Index further gained strength last week and broke out of a major resistance zone close by.

USD-INR currency pair heading up closed green near 1% this week as well and at previous resistance 74.3 levels and has channel top resistance also ahead.

Crude Oil moved > 24% in the last 5 weeks at resistance zone at 75-77 levels which is not good for indian economy..

Gold bounce back once more with a hammer last week from the previous week dip after dollar strengthened and attempting to get back into support zone from where it had slipped last week which has resistance now.

Indices corrected last week 3-4% and at a support zone but the momentum and trend on short term has slipped to sideways

The bias now turned moderate bearish as not much of correction may have happened since long and also since candlestick and lost momentum leads to it.

However there scope for a bounce cannot be ruled out as there still is a divergence on nifty and price is at a support zone.

India vix has shot up 12% to near 19 levels and then reverted to near 17 levels losing 9% and could be forming new volatility range now that traders which option buyers would now have to adjust themselves to this choppiness but options sellers would be having enough premium at this level.

Ratio spreads could be something to look for at this volatility levels.Double diagonal also could be applied tp benefit from the vega.Using Vertical Spreads in options are likely to give more probable wins as compared to naked long/short positions during these level where it is decisive of a bounce or a down move .Positional long trades need be alert on when the support levels as indicated earlier are taken away or when to trail as and when resistances are taken away.

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