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Outlook For Wednesday: NIFTY Placed Near Imp Short Term Supports; Need To Stay Above This Point

In an immensely volatile session, the NIFTY oscillated back and forth in a wide 200-point range before it closed the day with modest gains. The markets saw a subdued but positive start to the day only pare the opening gains in the first hour of the morning. The index slipped in the negative zone briefly only to crawl back inside the positive territory. The NIFTY went on to show a strong pullback while it marked its intraday high point at 11854. However, the remaining part of the session saw gradual paring of those gains. The headline index finally ended the day with a net gain of 32.10 points (+0.22%).

The NIFTY is now placed at a very crucial juncture. It is still below the short-term 20-DMA which presently stands at 14797. However, it appears to have taken support at a basing trend line pattern resistance. The low of 14651 would be important to watch for in the immediate short term; NIFTY will have to stay above that point to avoid further weakness. The volatility remained unchanged; after massive increase yesterday, it came off just 0.95% to 25.2275. 

As we enter the penultimate day of expiry of current derivative series, expect the session to stay dominated with rollover centric activities. The levels of 14790 and 17845 will act as resistance; supports come in at 14650 and 14565.

The Relative Strength Index – RSI, on the daily chart is 49.36; it stays neutral and does not show any divergence against the price. The daily MACD is bearish and stays below its signal line. A small black candle occurred on the charts; apart from this no other significant formations were noticed.

Though the NIFTY ended in the positive territory, it was the sixth day in a row where the markets closed lower than its opening levels. The Bollinger bands had gone much wider than normal indicating higher than normal volatility. The sharp deviation from the mean has resulted in the corrective that is being witnessed currently.
NIFTY’s staying above 14650 is crucial as it is an immediate pattern support and move past its short-term 20-DMA. If the current supports are broken, it would be no surprise if the NIFTY tests 50-DMA, which is currently placed at 14368. The markets are exhibiting a highly tentative moves while it is in the process of finding a short-term support. We reiterate staying light on positions and continue adopting a selective approach while vigilantly protecting 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)

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