In a sluggish day of the trade, the Indian equities continued to modestly correct and end the day on a negative note after spending the major part of the session without any directional cue. The Markets opened on a positive note; it marked the high point of the day in the early minutes of the trade. However, the NIFTY soon slipped in the negative and traded in a sideways trajectory. It did manage to rebound from lower levels and go in the positive zone; however, that was short-lived. The last hour and a half saw intensified selling pressure gripping the markets. The headline index slipped below the psychological 18000 levels. It finally ended with a net loss of 110.25 points (-0.61%).
The options data do not present encouraging pressure. On one hand, the NIFTY is still not out of the woods as it deals with a potentially bearish Head & Shoulders formation. It has failed to move above 18150 levels and therefore remains prone to bearish implications of this formation. On the other hand, the levels of 18000 and 18100 saw Call writing taking place; this makes the zone of 18150-18200 a major resistance area for the markets in the near term.
Volatility declined modestly; INDIAVIX came off by 1.75% to 15.1950. Wednesday is likely to see a tepid start to the day; the levels of 18050 and 18090 will act as potential resistance levels. The supports will come in at 17950 and 17880 levels.
The Relative Strength Index on the daily chart is 51.79; it is neutral and does not show any divergence against the price. The daily MACD is bearish and remains below the signal line. A black body emerged; apart from this, no other formations were seen on the charts.
The pattern analysis shows the formation of a potentially bearish Head & Shoulders pattern staying valid; to invalidate this pattern, the NIFTY will have to move past the 18150 levels convincingly and stay above that. Unless this happens, the markets remain prone to some extended phases of weakness within a defined range.
All in all, we recommend staying away from creating any aggressive leveraged positions until a clear directional bias on either side is established. The markets are going to stay stock-specific for some more time; they are also likely to get increasingly defensive going ahead from here. We recommend continuing to stay extremely selective and approach the markets with a cautious outlook 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)
