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Outlook For Wednesday: NIFTY To Stay Largely Range-bound; These Levels Will Have Prominent Reference Point Going Ahead

Tuesday’s session literally saw the markets trading precisely on the anticipated lines. The absence of overnight global cues saw the markets opening on a positive note and getting stronger as the day progressed. At the same time, the NIFTY resisted precisely at the double top resistance point of 11430. After opening on a higher note, the headline index tested these levels as it marked the day’s high of 11437.25. As expected, the NIFTY encountered a fresh wave of selling from this point, which took saw the index paring over 140 points from its high point. While ending near its low point, the benchmark NIFTY50 settled with a net loss of 37.70 points (-0.33%).

Even though there are two days to weekly options expiry, the NIFTY has practically ruled out the possibility of moving past 11500 as a significant amount of call writing was seen at 11500, levels today. This level holds second highest Call OI after 11650. Importantly, the significance of the level of 11430 has been reinforced as an important double top resistance as the NIFTY faced strong resistance at that point. If we look from an immediate short-term angle, NIFTY will not have any sustainable up move unless this level of 11430 is taken out. 

Some possibilities of a mild technical pullback cannot be ruled out. Wednesday will see the levels of 11365 and 11430 acting as resistance points. Supports come in at 11250 and 11185 levels.

The Relative Strength Index (RSI) on the daily chart is 50.03; it has marked a fresh 14-period low again, which is bearish. The daily MACD is bearish and trades below its signal line. A small engulfing bearish candle has emerged. This remains important as it highlights the importance of the level of 11430 as a pattern resistance.

The pattern analysis reveals that the NIFTY has failed the double top breakout that it had achieved when it moved past 11430 level. In the process, it has marked a lower top at 11800; this level can act as an intermediate top for the markets.

Stepping in the trade on Wednesday, the markets are expected to remain largely range-bound with limited upsides. The level of 11250 would be crucial in the near term as any breach of this level will invite incremental weakness. We recommend continuing to adopt a crucial view on the markets and avoid aggressive positions on either side.

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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