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Nifty to remain vulnerable to sell-off till it stays below 14,880 levels

Karan DSIJ
·2-min read

It was yet another day of roller coaster ride for Nifty as a movement of 262 points was witnessed, which was above the 10-day average.  

Nifty opened the session on a positive note and extended its gains to scale above the 14,700 mark. However, sharp profit booking emerged from these levels and within no time, the index was back below the 14,600 mark. Thereafter, the index traded in a stipulated range but in the last leg of the trade, a sharp sell-off emerged and the index ended down by nearly 1 per cent.   

The price action of the day formed a bearish candle as the closing was lower than the opening level and wiped out the recovery of the prior session.   

The positive momentum was limited to one day and Nifty resumed the downward move again. Monday’s recovery of over 200 points from the day's low was short-lived and Nifty once again tested the 14,461 support level. Since February 26, Nifty had tested the support zone, which is placed in the region of 14,420-14,480 several times. In fact, it tested this zone multiple times in the last seven trading sessions.  

Nifty is moving in a downward channel and the leading indicator, RSI is in an upward channel. This negative divergence of price making a lower high and the RSI making a higher high is giving clear signs of suspicions. We have not seen this kind of negative divergence after March 2020.   

Going ahead, the 100-DMA, which is placed at 14,486, is a key support level. A decisive close below this would open gates for a further down move towards the level of 14,240-14,150.   

On the upside, the level of 14,660-14,740 is a big hurdle for the bulls and once the bulls manage to cross this hurdle, the next hurdle will be placed at 14,880 levels.