It was a day of consolidation for the Indian equity markets as the NIFTY opened higher but ended up closing with a modest cut. The markets saw a positive start to the day. However, after opening on a positive note the Index ended up marking its high point for the day in the early minutes of the trade. As the markets maintained the bulk of their gains in the first half, ended up slowly paring all of those gains. The NIFTY drifted slowly and by late afternoon trade, it slipped into the negative zone. The modest losses continued to exist until the end; the headline index closed with a modest loss of 43.70 points (-0.26%).
Markets are likely to see a tepid start to the day. The NIFTY has broken above 16400; this level is likely to act as major pattern support in the event of any corrective move on the downside. The markets may have broken out from the broad 15700-16400 trading range, but it seems that it has created yet another zone between 16400-17000 levels. The markets are presently inside this relatively less broad range; any slip below 16400 will push the markets again into the broader trading range. The price action of NIFTY against this level will be crucial to watch over the coming days.
While a soft start to the day cannot be ruled out, the NIFTY is likely to see resistance at 16650 and 16760 levels. The supports come in at 16500 and 16380.
The Relative Strength Index (RSI) on the daily chart is 52.25; it continues to stay neutral while not showing any divergence against the price. The daily MACD stays bullish and above the signal line. Apart from the black body that emerged, no other formations were seen on the charts.
Overall, tentative and mildly tepid behavior of the markets cannot be ruled out; there has been some offloading of longs from higher levels as indicated by the derivatives data. The NIFTY current month futures have shed over 6.43 lakh shares of 6% in net OI. The reduction in OI has come with the decline in NIFTY; this indicates a likely unwinding of longs at higher levels.
The markets are likely to stay ranged in the very near term; any sustainable up move shall occur only if the NIFTY can move past the 50-DMA, and/or 17000 levels comprehensively. Until this happens, we will find the markets stay and oscillate in the wide trading range. A highly selective and stock-specific 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)
