Nifty retests breakout zone: Key levels to watch
The previous technical note categorically mentioned that the persistent low levels of VIX remain a cause of concern and a violation of 19,400 can trigger a fresh downside for the markets.
Quite on the expected lines, the NIFTY remained under severe corrective pressure in three out of the past four sessions. The weakness in the equities was fueled by macroeconomic factors, US bond yields showing a sharp spike, and rising geopolitical tensions in West Asia.
The NIFTY traded in a wider 719-point range and went on to close with a net loss of 495.40 points (-2.50%) on a weekly basis.
The beginning of the week stayed eventful; the Indian markets saw volatility as represented by INDIA VIX dipped to a new low of 8.82 and spiked over 20% on the same day. On the same day, in the afternoon, the US 10-year Bond Yield tested the 5% level. This was a 15-year high, seen previously only in 2007.
This sent the equity markets into a tailspin. The markets remained under strong corrective pressure for three sessions in the truncated week, with the last trading day seeing a technical rebound.
From a technical perspective, the NIFTY has retested the previous original breakout level of 18,850-18,900 and has attempted to take support.
So long as NIFTY manages to keep its head above 18,850-18,900 levels, it has a chance to extend the rebound. Any violation of this support zone will invite weakness.
Monday is likely to see a quiet start to the week. INDIAVIX, which had spiked over 20% in the week, had tapered down; it gained just 0.81% on a weekly basis.
