[Chart of The Week] Will Buyers Step In Here?

JC Parets
July 23, 2019

Since early July stocks in India have come under more selling pressure, with the Mid-Caps and Small-Cap indices falling roughly 10% and the large-cap Nifty 50 falling about 6%.

This has exacerbated the relative underperformance of India versus other Emerging Markets which it had been outperforming up until late May.

Prices in many of the major indices are now approaching critical levels of support, begging the question will buyers will step in again to defend these levels or is more selling ahead?

Here's the Nifty Free Float Mid-Cap 100 Index approaching its 2019 lows as momentum gets oversold again. While it's likely we see a relief rally from these levels, the quality of this bounce from 16,000 will provide insight into whether prices will stabilize and work their way higher or if a more sizeable move to the downside is ahead.

Click on chart to enlarge view.

Our concern is that this is the third test of this major support level since October, and the more times a level is tested the more likely it is to break. If prices cannot stabilize above 16,000 and breadth/momentum readings begin to improve for the majority of stocks then this market looks vulnerable to another leg lower toward 14,200. A nearly 12% decline.

We're watching this very closely in the days and weeks ahead.

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Allstarcharts Team

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