While the corrective undertone continued to persist in the Indian equity markets, the markets also showed the first sign of getting some stability and taking some respite from the recent corrective action. Much on the expected lines, and as mentioned in the previous technical note, the levels of 18000 continued playing a pivotal role as the markets attempted to stabilize themselves. The NIFTY opened on a positive note but soon slipped in the red in the early minutes of the session to mark the low point of the day. The Index recovered and went back inside the positive territory by afternoon, and after that, stayed in a sideway trajectory until the end. Following an over 250-point recovery from its low point, the headline index ended with a minor gain of 10.50 points (+0.06%).
The NIFTY had a slip below 18000 levels on Monday; however, a sharp recovery from that point has once again validated the level as a crucial support zone in the near term. Looking at the weekly options data, the Call unwinding was seen at 18000 and 18200 levels also point at a greater likelihood of the NIFTY taking support at these levels. From the technical perspective, NIFTY stares at a technical pullback if it keeps its head above 18000 levels. So long as this point is defended, all corrective moves if any will have limited downsides. Only a slip below 18000 will invite incremental weakness.
Tuesday is likely to see a positive start to the day. The levels of 18190 and 18270 will act as probable resistance points; the supports will come in at 18065 and 17950 levels.
The Relative Strength Index (RSI) on the daily chart is 60.55; it is neutral and does not show any divergence against the price. The daily MACD is bearish and trades below the signal line.
A Hammer occurred on the candles. This is not a classical hammer as it has a small wick that can be ignored. However, the occurrence of such a Hammer or such candle with a long lower shadow hints at a potential technical pullback. It can act as a reversal candle if it occurs following a downtrend. However, this would need confirmation on the next trading day.
All in all, although the trends in the markets will be influenced by reactions to the key numbers that will keep coming out, we will continue to see stock-specific performances dominating the landscape. We will see PSE Stocks, Auto, select private and PSU banks, and Infrastructure stocks getting relatively stronger and trying to relatively outperform the markets. So long as the NIFTY is above the 18000 levels, we recommend avoiding attempts to short the markets. While keeping fresh purchases limited and selective, a cautiously positive approach is advised for the day.
This was first published by The Economic Times.
Milan Vaishnav, CMT, MSTA
Consulting Technical Analyst
Member: (CMT Association, USA | CSTA, Canada | STA, UK) | (Research Analyst, SEBI Reg. No. INH000003341)
