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Outlook For Wednesday: NIFTY's Price Action Against This Level Stays Crucial; Markets To stay Vulnerable At Higher Levels

Tuesday’s session turned out much on the anticipated lines as the NIFTY traded in a broad range end ended the with modest gains. The Indian markets took cues from the overnight recovery in the US markets followed by the strong Asian market setup and opened with a strong gap up. However, markets failed to capitalize on the buoyant opening and did not breach the opening highs for the rest of the day. During the, by afternoon, the Index pared over 250-points from the high point of the day and slipped in the negative zone wiping out all the gains. The last two hours of the trading session saw some recovery coming in and this saw the NIFTY eventually ending with a net gain of 100.30 points (+1.02%).

Markets are likely to stay equally jittery and in a wider-than-normal trading range. Important thing to note is that despite the wild swings in the markets and with NIFTY moving past the 10000 level momentarily, the maximum Call OI continued to remain concentrated at 10000 strikes and it did not shift higher or lower. This indicates that unless a tactical shift occurs on the options front, the levels of 10000 will continue to pose resistance to the markets. The NIFTY’s price action against this level will be crucial to watch.

The levels of 9980 and 10040 will act as immediate overhead resistance points. The supports are likely to come much lower at 9755 and 9660 levels. The upsides are expected to remain capped but any move on the downside is likely to make the trading range wider-than-usual.
The Relative Strength Index (RSI) on the daily chart is 57.03; it continues to remain neutral without showing any divergence against the price. As expected, and mentioned in the previous notes, the daily MACD has shown a negative crossover. The indicator trades below its signal line and that is bearish.
A Hanging Man candle emerged on the chart. Not only this candle has appeared while the NIFTY stays in a rising channel, but also below the important resistance point that lies in the form of the 100-DMA, which is presently at 10156. This makes the formation of this present candle potentially bearish.
Given the present technical setup, the NIFTY will continue to experience sporadic up moves, but at the same time, the up moves, if any, will remain limited in its extent. The downsides, as and when they occur, will make the trading range wider. We reiterate staying away from creating aggressive bets on either side and continue approaching the markets with caution and vigilantly protect profits at higher levels.

Milan Vaishnav, CMT, MSTA
Consulting Technical   Analyst
Member: (CMT Association, USA | CSTA, Canada | STA, UK)  | (Research  Analyst, SEBI Reg. No. INH000003341)

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