Sensex, Nifty breach 200-DMA but don't panic on event driven sell-off

Traders should opt to stay on the sidelines as this is an event-driven volatility, and wait for a decisive confirmation

This morning Brent Crude soared past the $100-mark as the conflicts between Russian-Ukraine intensified. Market sentiment across Asia was dented after Russian President ordered troops to invade Eastern Ukraine in a “Special Military Operation”.

Shortly after Putin’s speech, reports indicated that there were explosions heard in the parts of Kyiv, capital city of Ukraine. Earlier, Russia deployed troops in Eastern Ukraine to recognize republics of Donetsk and Luhansk as sovereign states.

The BSE Sensex and Nifty 50, the key indices in India opened gap-down, and were down more than 3 per cent each in early trades. In the process, the benchmarks shattered the major significant support of 200-day moving average (DMA), a key trend indictor, as per technical analysis.

Here’s how to look at major indices going forward:-

S&P BSE SENSEX
Outlook: Don’t jump to decisive conclusion, wait for confirmation

The opening trades did violate the major trend indicator average of 200-day moving average, placed at 56,570. This shows weakness on an intraday, rather daily time frame.  However, unless continued follow-up selling does not support the weakness, the trend could revive. Also, the simultaneous negative closing, if emerges could test the significance of 53,000 level, which is 50-weekly moving average (WMA) support. Thus, only an aggressive closing below 53,000 may see further decline, which needs to be closely watched. On the upside, beside the 200-DMA, now 58,000 becomes a dominant resistance. CLICK HERE FOR THE CHART

NIFTY50
Outlook: 50-WMA holds the key

The early morning trades saw exaggerated selling pressure after the index opened gap-down below the 200-DMA, set at 16,890 level.  The trend appears weak on the daily chart. But, to decide on the build-up of a bearish trend needs to be clearly gauged on 16,530 level, its 50-WMA. If the sentiment and aggression destroys this support on a weekly closing basis and witness the selling pressure thereafter, then only one could say it is a “selling market”. Immediate resistance comes at 17,000 level, a deep sentimental mark.  CLICK HERE FOR THE CHART
 
NIFTYBANK

Outlook: Recent scenarios show bulls could manage to rebound

This is the third time in the last four months that the Nifty Bank index fell below the 200-DMAast four months. The index has thereafter bravely managed to recover in the last three instances and held on to the bullish bias. The same may happen in the current decline too. The confirmation of the same could emerge on whether the index sees continues sell-off or it goes sideways, as it did in previous declines below the 200-DMA. At present scenario, the next support comes to 35,000 level.  CLICK HERE FOR THE CHART

NIFTY FMCG INDEX
Likely target: 33,500
Downside potential:  5%

Not due to the current geopolitical tension, but this index is technically declining since the formation of the “Death Cross”, which occurred in early February. The Moving Average Convergence Divergence (MACD) lingers in the negative trajectory, falling below the zero line, shows the daily chart. Unless it conquers 36,000 level, the bearish trend continues to see more selling pressure and could drift toward 33,500 level. CLICK HERE FOR THE CHART
 
 
NIFTY IT INDEX
Outlook: Positive divergence on RSI

Nifty IT index breached the 200-DMA after mid-2020, the bullish rally gained over 200 per cent so far. It does show a major signal of a negative bias today, but the Relative Strength Index (RSI) hints at a positive divergence, according to the daily chart. At the moment, the index price may present a cautious outlook, but the technical indicator shows otherwise. The next support comes at 32,000 with resistance falling at 34,200 level.  CLICK HERE FOR THE CHART