CLSA says the Nifty 50 is approaching a potential bottom, but warns that its ability to stabilise will depend on holding key support levels as failed breakouts unsettle markets across the US and Asia.
CLSA says the Nifty 50 is edging closer to a potential floor, but whether Indian equities can steady themselves will depend on how well the index holds a cluster of closely watched support levels while global markets remain uneven. In its October 23 technical note, the brokerage said a series of failed breakouts across major technology-heavy markets in the US and Asia had shifted the near-term environment away from trend-following and towards range-trading, even as the sell-off created selective opportunities in some areas.
Laurence Balanco and Yi Zhou said the broader picture is mixed rather than uniformly bearish. According to CLSA, the S&P 500 has retained its breakout because market breadth has improved sharply, with the share of index members trading above their 20-day moving averages rising to 71.8% on October 20 from 17.8% on September 10. The report identified 7,600 to 7,642 as a key support band for the US benchmark, warning that a close below that zone would imply a return to the previous range.
By contrast, CLSA said the Nasdaq 100 has slipped back into its June-to-October trading band and fallen below both its 20-day and 50-day moving averages. It added that weakening breadth there has favoured the so-called Magnificent Seven stocks over the wider index, even though the Nasdaq’s larger breakout remains technically intact. In India, the brokerage’s earlier assessment had pointed to 21,700 to 22,182 as a major support area for the Nifty 50, with initial resistance at 23,070 and a wider resistance zone between 23,654 and 24,183 around the 50-day and 200-day moving averages.
The regional tone is similarly mixed elsewhere in Asia. CLSA said breakout attempts in Japan and Taiwan had failed, with the Nikkei slipping back below 20,000 to 20,665 and Taiwan’s Taiex falling beneath its 200-day moving average. South Korea stood out as the clearest candidate for a tactical rebound, with Kospi 200 futures reaching support at 823 to 870 and flashing both DeMark Combo 13 and Setup 9 buy signals. Hong Kong remains vulnerable, according to the note, with the Hang Seng Index approaching support at 22,518 to 22,700, while the CSI300 is testing 4,000 to 4,020 and showing a daily relative strength index below 18, a reading CLSA described as the weakest since June 2013.
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