In the previous technical note, it was mentioned that the 100-DMA levels are still one of the major resistances on a closing basis. The Indian equities opened on a firm note on Wednesday as the NIFTY attempted to move higher. However, the markets lost ground from the higher levels and chose to consolidate as it ended the day with a modest loss. The NIFTY opened on a higher note and marked the high point of the day in the early minutes of the trade. It slowly gave up gains and slipped in the negative territory by afternoon. While it made its low point in the late afternoon trade, the NIFTY still kept its losses modest. The headline index finally ended with a modest loss of 69.85 points (-0.41%).
The NIFTY’s coming off from higher levels; more importantly, the staying of the Index below the 100-DMA reinforces this point as a major resistance point going ahead. With 100-DMA at 17351, the NIFTY will not have any sustainable upside unless these levels are taken out convincingly. We have weekly options expiry coming up as well; the options data suggest maximum Call OI at 17500 levels followed by 17300 levels. The options data helps us fairly conclude that unless the zone of 17350-17500 is taken out convincingly, there are greater possibilities of the markets facing corrective pressure at higher levels.
Thursday is likely to see the levels of 17300 and 17365 acting as resistance points. The supports come in at 17200 and 17030 levels.
The Relative Strength Index (RSI) on the daily chart is 55.67; it continues to remain neutral and does not show any divergence against the price. The daily MACD is bullish and above the signal line. A dark cloud emerged on the candles; apart from this, no other formation is observed.
The pattern analysis shows that while the NIFTY has resisted the 100-DMA which stands at 17351, it is just a notch above the 50-DMA which is at 17225. If this level is also violated, we may see the markets finding themselves under pressure with each technical pullback that it may see in the future.
All in all, even if the markets attempt some move on the upside again, all such moves must be utilized to protect profits rather than making fresh purchases. All new purchases must be kept highly stock-specific in nature and aggressive buying must be avoided. Unless the NIFTY assumes any directional move above 17500 or below 17000, this 500-point range remains a consolidation zone for the index. In absence of any directional bias, a highly stock-specific and selective 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)
