Chart reading: Sensex, Nifty show reversal, but will this rebound sustain?

As the market breadth turns negative, only sideways consolidation or V-shape recovery can revive the positive sentiment.

The benchmark indices, S&P BSE Sensex and Nifty50, have plunged over six per cent in the last 12 sessions, resulting in market participants losing confidence and waiting for revival of the trend. This sharp decline suggests that a rebound is imminent; however, the bigger question is will this recovery sustain and should investors start investing aggressively in the stocks? Technical charts does show rebound but suggest in order to sustain recovery, indices must witness sideways consolidation or a V-shape recovery to regain the positive sentiment and reverse market breadth. 

BSE SENSEX: A breach of 38,250 on the weekly scale led to violate 200-day moving average (DMA) at 37,160, as per daily chart. This has triggered selling, hurting investor sentiment badly. As the index has been falling continuously since last 12 sessions with some intermittent gains, some recovery cannot be ruled out as per the technical analysis. That said, as the trend has turned negative, any reversal from current levels would indeed witness selling pressure. The immediate resistance comes at 37,100 and 37,300 levels. One should not be aggressive for long positions till index develops some consolidation, trading sideways or sees V-shape recovery. CLICK HERE FOR DETAILED CHART VIEW
 
NIFTY50: As the index breached its crucial support of 11,100 along with 200-DMA which was at 11,140, the market breadth has turned negative. With the recent steep fall of 800 points -- from 11,600 to 10,800 -- the scenario of pessimism has disrupted the bullish trend. Going forward, a recovery from current levels cannot be ruled out. That said, unless a sustained reversal with a consecutive “gap-up close” does not appear, every upside might witness selling pressure. A near-term rally towards 11,000 to 11,100 may help index to minimize the carnage in various stocks. The overall trend remains weak as both relative strength index (RSI) and moving average convergence divergence (MACD) trade with negative crossovers in oversold territory. 
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NIFTYBANK: With a formation of Double top on the weekly chart, the index has lost the upward momentum. A gap down close has dented the positive sentiment, resulting in a feeling of “losing out” on exiting long positions. In bullish markets, a negative formation on the top of a trend has a severe impact for short-term trading. Not only did this result in more downside but also in ‘sell on rise strategy’. Here onwards, every upside may see selling pressure as the index dipped below 200-day moving average (DMA) placed at 28,350. As the index has filled the recent gaps, the next one comes at 26,920 level, which is where the index seems headed. Though, RSI has entered the oversold territory, as per daily chart, the weekly RSI shows negative divergence indicating more weakness going ahead. CLICK HERE FOR DETAILED CHART VIEW
 
NIFTYAUTO: A falling channel pattern in the weekly chart has broken on the downside, a breakdown that results in bearishness for quite some time, as per the technical analysis. Not only the medium term but the longer-term perspective has changed to negative. The current levels of 6,800 were last seen in February 2016, If this level is breached, then a fall of another 5 per cent is inevitable. The immediate resistance comes at 7,000 and 7,200 levels. CLICK HERE FOR DETAILED CHART VIEW
 
NIFTYREALITY: Since January 2019, the index has showed strong recovery with higher high, higher lows formation as per weekly chart. Stability above 100-WMA (Weighted Moving Average) could have enabled the next level of upside; however, current scenario shows a weaker sentiment. A trend line breakdown of rising channel pattern at 264, as per daily chart shows weak upside. That said a support at 250, another level of trend line holds key significance. A major reversal in trend said to appear only if counter crosses and sustain above 262. MACD has fallen below zero line suggesting reversal might not have sufficient strength and positive momentum. CLICK HERE FOR DETAILED CHART VIEW