The equity markets took a corrective turn after extending some gains over the previous close and ended the day with a cut. The NIFTY saw a stable opening; it opened higher on a positive note and formed its intraday high point in the early minutes of the trade. After that, the NIFTY traded sideways in a capped range while not taking any major directional cue. By afternoon, the index traded on a flat note. It was in the second half that the markets took the turn for the worse as they witnessed a sharp corrective move. The NIFTY went on to lose over 372 points from its high point of the day. Following some modest recovery from the lower levels, the NIFTY ended with a net loss of 208.30 points (-1.23%).
Although the trading range has been wider looking at the quantum of the NIFTY coming off from its highs, the NIFTY has stayed within a technically defined trajectory. In the previous technical note, it was mentioned that the zone of 16900-17000 is likely to act as a stiff resistance zone for the markets. The NIFTY saw a corrective bout the moment it went inside this zone. If we sum up the technical structure of the markets, it shows that no meaningful up move shall occur so long as the NIFTY is below the 16900-17000 levels. The 200-DMA, which presently stands at 16981 is also a major resistance on a closing basis. The strikes of 17000 show the highest accumulation of the Call OI as per the weekly options data.
Wednesday is likely to see the levels of 16730 and 16800 acting as potential resistance points. The supports come in at 16550 and 16480 levels. The trading range may continue to stay wider than usual over the coming days.
The daily RSI is 47.15; it stays neutral and does not show any divergence against the price. The daily MACD is bullish and remains above the signal line. The large black body emerged which reflected the directional consensus of the market participants; apart from this, no other formations were observed.
The markets are presently in a no-trade zone so long as it stays between 16500-17000 levels. The reason for this is that the NIFTY has a major pattern resistance near 16800-16900 in form of the lower edge trend line of the bearish descending triangle that it violated; on other side, with 200-DMA at 16981, the zone of 16900-17000 makes up a major resistance zone for the markets.
It is recommended to continue approaching the markets on a highly selective note. Positions on either side should be kept limited and exposures should be curtailed. While doing so, it would be prudent to vigilantly protect profits at higher levels.
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)
