In a weak trading session, the Indian equities gave up a few crucial supports as they opened weak and ended the day with a loss. While inheriting the weak global trade setup of the weekend, the NIFTY opened with a weaker note. Following a negative start to the day, the NIFTY opened below the crucial supports and traded with a bearish undertone throughout the day. It tested the low point of the day when it slipped below the psychological level of 16900. Some modest recovery followed that took the NIFTY a bit higher. The index finally ended with a net loss of 218 points (-1.27%).
From the technical perspective, what has been damaging for the markets is the violation of the 200-DMA on a closing basis. The 200-DMA presently is at 17199. NIFTY has dragged its resistance levels lower; this point will now act as a strong resistance on a closing basis. Going by the options data as well, the strikes of 17000 and 17200 witnessed large Call writing; the level of 17200 holds the highest Call OI. This makes this level a formidable resistance from the derivatives data point of view as well.
Volatility spiked; INDIAVIX surged 15.83% to 21.2575. NIFTY will try and find some stability by attempting a technical pullback. The levels of 17000 and 17145 will act as immediate resistance points. The supports will come in at 16880 and 16805 levels.
The daily RSI is 42.89; it shows a bullish divergence against the price. While the price made a new 14-period low, the RSI did not, and this resulted in a bullish divergence. The daily MACD is bearish and stays below the signal line. A falling window emerged on the candles. This results of a gap down, and usually resolves in the direction of the trend. However, this will need confirmation on the next bar.
The markets have violated the important 200-DMA; however, this would not mean an outright start of the downtrend. NIFTY has just dragged its resistance levels lower in the event of any technical pullback. Otherwise, the zone of 16825-16900 is also an important pattern support zone for the markets. The markets have also seen the addition of short positions over the past days as the decline has come with an increase in OI. So, in the given scenario, the most prudent way to navigate the markets will be by staying highly stock-specific and selective in approach while avoiding excessively leveraged positions
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)
