After falling for five consecutive days, is it time for rebound in Nifty or more pain on cards?

It was a ‘Black Monday’ for Nifty as it extended its decline for the fifth day in a row and witnessed severe single-day fall in percentage terms since December 21. It ended below the important psychological mark of 14,700, down by 2 per cent. Also, volatility raised its ugly head and jumped 14.47 to breach its last six-month high.   

The price action of the day formed a long bear candle, carrying lower high & lower low. Further, the range of the bear candles is greater than the previous four candles. At the same time, the index has breached its 21-EMA. With this, Nifty is now trading below its 5-8-13 & 21-EMA and all of them are trending down.  

To know how much further Nifty can fall, we can analyse the last decline that was seen from a swing high of January 21 (14,753) to the low of 13,596.75, Nifty took about 5-6 trading sessions and declined about 7.84 per cent while in the current decline, Nifty has already corrected about 5 per cent. Hence, as per the rules of sequential movement, there is a possibility of further correction of 1-2 per cent in the index. Further, this results in the index testing its gap area, which was formed on February 2. Hence, the zone of 14,336-14,469 is likely to act as strong support for the index in the near term.   

The 14-period RSI on the daily timeframe has logged a fresh 14-period low, which is negative. At the same time, the daily MACD remains in the sell mode. Also, the -DI line has crossed over the +DI line, which adds to the chorus of bearishness and indicates that the bears are tightening their grip.