Golden Ratio acts as key support for bulls!

Nifty remained under selling pressure for the fifth consecutive session and ended down by 1.07 per cent. It opened with a gap-down, following feeble global cues, and further drifted lower as the session progressed. Nevertheless, during the second half of Thursday’s session, a recovery of 100 points was seen from the lower levels, which helped the index to settle above the 13,800 mark.       

Among the sectors, barring Nifty Bank and Nifty Private Bank, all other sectors ended in red wherein, Nifty Realty, Nifty IT & Nifty FMCG emerged as the top losers. Interestingly, India VIX cooled off nearly half a per cent on an expiry day and turned down exactly from the zones of 25-26. This is not the first time that such a thing is happening! Lately, it has been observed that every time it nears the zone of 25-26, it takes a U-turn!      

The price action of the day formed a Doji-like pattern (open & close is almost the same) with a gap-down opening. The formation of Doji candlestick pattern after a sell-off provides a hint of a bottom formation. The emergence of the reversal candlestick pattern (Doji) near the level of 13,700-13,800 reiterates the importance of 13,700-13,800 as an important support zone. The zone of 13,700-13,800 is an important support as it’s the confluence of 61.8 per cent of the current upmove (13,131-14,753) and 50-DMA.       

The index has now corrected nearly 7 per cent from the high of 14,753 to the low of 13,713. With this, it has filled the upside gap of December 28. Interestingly, since March 2020, the decline in the index has not lasted more than a week with an average correction anywhere between the ranges of 8-11 per cent.      

In the current scenario, we have already witnessed five sessions of back-to-back sell-off and a correction of nearly 7 per cent. Besides, the formation of Doji near the confluence of the support zone indicates that a pullback rally may be on the offing. Moreover, the recent fall has led the daily stochastic oscillator to an oversold territory with a reading of 10 and the RSI has reached near the 40-mark. At the same time, the RSI is placed at the upward rising trendline.   

Considering a major event like the Union Budget on the horizon, we would opine to be selective in buying and at the same time, suggest not carrying over leverage positions. Hence, keep your position sizing a bit light.