Nifty50 shows ‘Head and Shoulder’ pattern on daily chart – more correction on cards next week? Know what analysts say

With Indian markets closing Friday’s session decisively in negative, several analysts have taken a wait-and-watch view while suggesting key support and resistance levels and expect a further correction in the indices, possible on the back of key global events like US Fed FOMC meeting.

“The broader structure remains bullish but with Nifty closing convincingly below 17600 has dented the intermediate structure for sure. Pricewise, it resembles a ‘Head and Shoulder’ pattern on the daily time frame chart, which does not augur well for the bulls. If this pattern proves its significance, we may see a further correction towards 17200 – 17000 in the next week,” analysts at Angel One said.

They do not want to fall into this camp and would rather reassess the situation in the first half of the coming week.

“As far as support is concerned, 17400 is seen as a key support,” the brokerage said, adding that the moment we see the Nifty sliding below it, correction in the index may get extended.

“On the flip side, if Nifty has to find its mojo back, it needs to go beyond Friday’s high of 17820 on a closing basis. So meanwhile, any minor bounce back towards 17650 – 17750 should ideally be used to exit longs.”

Angel One analysts advise traders not to get intimidated by Friday’s correction, rather keep a close tab on above-mentioned scenarios. Also, one should avoid trading aggressively till the time market stabilizes from this turbulence, it said.

According to Apurva Sheth, Head of Market Perspectives, Samco Securities, “Compared to Nifty’s previous peak of 17,992 on August 19, the index achieved a higher top of 18,091 on September 14. The 14-day RSI, however, has developed a lower top.”

“This suggests that momentum is slowing down. It seems that the Nifty may face strong headwinds near its previous highs now. The degree of immediate support is set at about 17,000 levels. Before making strong long bets in the markets right now, traders should exercise care,” Sheth added.