In the previous technical note, it was mentioned that the present technical setup of the markets hints at the NIFTY potentially slipping under some consolidation. The equity markets traded on the analyzed lines; they opened lower, got weaker, and ended the day with a loss. The NIFTY opened on a negative note and remained in the negative territory for the entire session. It remained in the declining trajectory as it kept marking gradual lows. While showing no intent to recover at any point in time during the session, the headline index ended the day with a net loss of 219.80 points (-1.24%).
From the technical perspective, the NIFTY has slipped under broad-ranged consolidation on anticipated lines. The NIFTY had halted its decline near the 20-DMA which presently stands at 17748. In the process of the corrective decline, it has slipped below the 100-DMA level of 17647. This makes the level of 100-DMA the most immediate resistance for the markets in the near term. It also makes the zone between the 100-DMA and the 20-DMA a strong resistance zone for the NIFTY going ahead from here. The NIFTY is still above the 50-DMA which currently stands at 17438.
As we step into Friday, the levels of 17600 and 17690 will act as potential resistance points for the NIFTY. The supports come in at 17500 and 17435 levels.
The Relative Strength Index (RSI) on the daily chart is 49.51; it is neutral and does not show any divergence against the price. The daily MACD is bearish and remains below the signal line. A strong black candle emerged on the chart. This appeared near the resistance point of 20-DMA; in the process, this has added credibility to this resistance point.
The pattern analysis shows that the NIFTY now again trades below the 20-DMA and 100-DMA. This has made the zone between the 100-DMA and the 20-DMA a strong resistance zone; in the same breath, the 50-DMA still continues to exist as a most important support for the NIFTY. The index will have to defend this support on a closing basis to avoid any major weakness from creeping in.
All in all, despite such a strong corrective wave and dominant weakness in the markets, some pockets like Autos, Pharma, Consumption, and select Pharma names grossly outperformed the broader markets. Such market behavior is likely to persist for some time; we will see such select pockets continuing to put up a strong show. It is recommended to avoid creating shorts and use downsides to make select purchases. A cautious outlook 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)
