The market action remained much on the expected lines; the NIFTY surged higher and recouped the bulk of its previous day’s loss to settle on Tuesday with gains. As mentioned in the previous technical note, the short covering did take place as anticipated, and the NIFTY also paused its surged near the key resistance point of 100-DMA. The markets opened on a higher note and got only stronger as the day progressed. They remained in an upward rising trajectory throughout the day as it kept marking incremental gains. The NIFTY did come off from its high point, but the bulk of the gains stayed protected. The headline index ended with a decent gain of 264.45 points (+1.56%).
The session has been important from many important technical angles. On one hand, it was expected that since the NIFTY has clearly violated the 100-DMA which stands at 17195 on a closing basis, this level will act as resistance at the time of the pullback. It is important to note that NIFTY has just halted its technical pullback just a notch below this level. On the other hand, the weekly options data shows that considerable Put Writing has happened at 17000 and 17200 levels. Also, there is significant Call unwinding happened between 17000 to 17500 levels. This market behavior shows that if some consolidation happens, then the zone of 17000-17200 may act as a major support area for the markets.
Volatility declined; INDIAVIX came off again by 7.20% to 18.6300. In all likelihood, markets may extend this pullback if there are no overnight negative cues to deal with. The levels of 17230 and 17300 will act as resistance while supports will come in at 17140 and 17050 levels.
The Relative Strength Index (RSI) on the daily chart is 42.50; it is neutral and does not show any divergence against the price. The MACD is bearish and below the signal line.
A Bullish Harami emerged on the candle. This happens that the white real body of the current candle is completely engulfed by the real body of the previous candle. Subject to final price confirmation, any such formation near a support area or after a decline hints at a potential reversal.
All in all, the opening of the markets, and its price behavior against the levels of 100-DMA will be crucial to watch. If the NIFTY moves past 100-DMA which presently stands at 17195 and stays above that point, we may continue to see some more short covering taking place. The market breadth will need to stay strong as this is important so sustain any upsurge in the markets. While continuing to stay selective and stock-specific while approaching the markets, 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)
