Gemstone Equity Research & Advisory Services

Outlook For Tuesday: NIFTY Placed At Crucial Juncture; These Levels Are Important Supports

In a very weak day of the equity markets, the Indian benchmark NIFTY50 ended the day with a sharp cut. A weaker start was expected, but the markets saw much feeble start to the week. It opened with a mild gap down and drifted lower throughout the day. At no point in time, the markets showed any intention to recover from the lower levels. The market breadth also remained weak and the Index went on to breach many short-term important levels. By the close of the day, the Index ended with a net loss of 173.60 points (-1.57%).

The move towards 200-DMA has been much faster; the 200-DMA now stands at 10858. This level can be considered as a major near-term support on a closing basis. The 200-DMA also coincides with the lower trend line of the rising channel in which the NIFTY is trading at present. The zone of 10830-10850 is now the crucial support, failure of which will take the markets lower. The India Volatility Index, INDIAVIX, spiked on predicted lines by 3.89% to 25.1350.

There might be some mild pullback in the initial trade. The levels of 10930 and 10965 will act as resistance points. The supports will come in at 10850 and 10775 levels.
The Relative Strength Index (RSI) on the daily chart is 52.77; it has marked a fresh 14-period low which is bearish. The daily MACD is bearish as it trades below its signal line.

A large black body emerged on candles. Such a formation signifies the secular downtrend that was seen in the sessions and also shows the consensus of the market participants on the downside.

The pattern analysis shows the NIFTY very near to two important support levels. One comes at the 200-DMA, which is presently at 10858; and another one coincides near the same level in form of a rising trend line, which is the lower edge of the rising channel.

The move in the previous session has reinforced the zone of 11300-11350 as an intermediate top for the markets. Markets are unlikely to move past this zone too soon now, and we may see all pullbacks getting sold into. There are mild possibilities of some minor technical rebound; however, such rebounds, if any, should not be chased at all. We reiterate a highly cautious view on the markets.

Milan Vaishnav, CMT, MSTA
Consulting Technical   Analyst
Member: (CMT Association, USA | CSTA, Canada | STA, UK)  | (Research  Analyst, SEBI Reg. No. INH000003341)

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