Index trend and stocks in action on September 01, 2020
One of the fondest memories of our childhood is popping balloons after a birthday party. There’s something inexplicably satisfying about pricking a balloon and watching it go pop in the very next movement. Well, you must be wondering what it has to do with the market! This was the actually the sight of markets on Monday as the market was pricked by a double whammy in the form of geopolitical tensions between China & India and also because, SEBI declined to extend the September 1 time limit to implement new margin rules, which led to the inflated balloon ‘pop’ instantaneously.
Nifty tumbled below the 11,400 mark and recorded its highest spread i.e. the difference between high-low since April 8, 2020. The spread of the day was a whopping 468 points, which was almost 3.5 times of the 10-day average. This led to the formation of a gigantic bearish bar, which is known as a bearish engulfing pattern in technical parlance. Its impact was so severe that it wiped out gains of almost the last six trading sessions. Also, Nifty has breached its important trendline support that was formed by connecting March lows.
Let us check what happened in the past when Nifty had formed a bearish engulfing pattern of such a gigantic magnitude. A resembling bearish engulfing was formed on January 20, which engulfed the price of the prior six trading sessions. So, can we assume that the market is giving some important signal by repeating the history with a formation of this gigantic magnitude of bearish engulfing as it gave on January 20?
To know more about it, we will wait for some more confirmation and evidence. By evidence, we mean something in the form of follow-up action.
Monday’s free fall halted near the 21-EMA, which has acted as a knight in shining amour in the recent past. However, given the speed at which Nifty has reverted to its 21-EMA and the chorus of negative market breadth, definitely raises the question of the viability of the 21-EMA as an important support for this time. Only time would tell this but for the time being, it’s important for the bulls to stay above the 21-EMA if they want to be in the game. Hence, the zone of 11,332-11,300 is a crucial support for the index in the near term and any breach of this support would mean a further strength to the bears. Also, if you recall, since the last week of July, there was a fierce fight between the bulls and the bears around the region of 11,330-11,410. Hence, this would be a crucial level for the index in the coming days.
On the upside, the level of 11,410 might act as an immediate resistance, followed by 11,490.
Overall, with a bearish engulfing pattern formation, the markets have conveyed a strong message to us. Now, the follow-up action would tell us whether or not it will repeat the same thing which it did after forming a bearish engulfing at an all-time high on January 20.
BEML Ltd: The company has bagged an order from the Ministry of Defence for the supply of 330 high mobility vehicles for Pinaka Projects at a value of Rs 842 crore.
Zensar Technologies Ltd: The company received a US patent for its innovative tool enabling direct conversation with the organisation’s leadership- ZenVerse.
Larsen & Toubro Ltd: The company has announced the closure of the strategic divestment of its electrical and automation (E&A) business to Schneider Electric, a global player in energy management and automation.
Biocon Ltd: Biocon & Mylan launched Semglee (insulin glargine injection) in the US to expand access for patients living with diabetes.
Rain Industries Ltd: India Ratings & Research has revised the company’s outlook to negative from stable while affirming the long-term issuer rating at ‘IND A’.
Mahindra & Mahindra Ltd: ICRA reaffirmed the long-term credit rating at AAA/Stable. The date for stake sale by subsidiary Mahindra Renewables in Neo Solren to CLP India for Rs 104.67 crore has been extended to September 2020.