Despite a negative day of the markets, the NIFTY displayed a lot of resilience during the day as it ended the day with a minor cut. Following a weak global trade setup, the NIFTY did open on a negative note; however, the opening showed much resilience as the other global markets were weaker. After trading with ranged losses, the markets tried to recover; and at one point in time in the afternoon, the NIFTY also went briefly in the positive. However, the headline index finally ended the day with a modest loss of 43.35 points (-0.25%).
On the daily chart, the most important technical situation is that the NIFTY has managed to defend the 100-DMA as a support on a closing basis. The 100-DMA stands at 17275. This level is a very crucial support to watch for over the coming days. NIFTY will have to keep its head above the 100-DMA on a closing basis to avert any incremental weakness from creeping in. On the other hand, given the short-term weakness, the 20-DMA is rapidly declining; it is now a 17382. If the NIFTY moves past this point, it may see some momentum returning in the markets. The market breadth was not as weak; it remained evenly placed.
Wednesday is likely to see a quiet start to the day. The levels of 17400 and 17435 acting as resistance points. The supports come in at 17250 and 17180 levels.
The Relative Strength Index (RSI) on the daily chart is 45.91; it is neutral and does not show any divergence against the price. The daily MACD is bullish and above the signal line. A spinning top occurred on the candles. This reflects the indecisive behavior of the market participants.
The pattern analysis shows that below the 50-, and the 20—DMA, but it has taken support at the 100-DMA on a closing basis. It would be crucially important for the NIFTY to defend this level on a closing basis.
All in all, the options data shows that though some amount of Call writing was witnessed at 17300 and 17400 levels, it does not represent any clear picture or any directional cues for the recent weekly expiry. However, we can fairly presume that for the upward momentum to return, NIFTY’s moving past the 20-DMA will be crucial. This level is presently at 17382. The markets are likely to remain highly stock-specific in nature; no dominance from any one sector is likely. However, Metals, Auto, Pharma, and a few select Banks may try to relatively outperform. While keeping exposures at modest levels, a cautious 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)
