In what can be termed as much worst-than-expected performance in the recent past, the Indian equities witnessed strong selling pressure throughout the day as it ended with a deep cut. The NIFTY saw itself opening on a modestly negative note. However, the index did not move into positive territory even once. Following a mildly negative start, the NIFTY continued to make gradual lows. It witness gradual but sustained selling pressure throughout the day which took it to violate the crucial support of 18000 levels. NIFTY slid even further, showed no signs of any major pullback, but ended with a net loss of 353.70 points (-1.94%) after a very modest recovery.
The Index has violated its key levels which is a bit damaging from the technical perspective. Even if we attribute this kind of selling pressure being influenced with the expiry of the current derivative series, the NIFTY’s violating the 17950-18000 levels has not only violated major basing pattern support, but it has also dragged lower the resistance points for itself going ahead. From the immediate short-term perspective, even if the NIFTY pullback and tests 18000, it will not only find a very stiff resistance at this point but it will also face resistance from a falling trend line which is drawn from the high point of 18600 and joins the subsequent lower top at 18350.
Volatility surged on expected lines; INDIAVIX surged 6.44% to 17.9125. The markets may see a jittery start to the day, but any pullback attempts will find resistance at 17935 and 18000 levels. Supports now exist at 17780 and 17700.
The Relative Strength Index (RSI) on the daily chart is 48.25; it has marked a new 14-period low which is bearish. However, RSI remains neutral and does not show any divergence against the price. The daily MACD is bearish and below the signal line.
A large black body emerged on the candles. This reflects a high degree of directional consensus that existed with market participants for today.
All in all, going by the pattern analysis, the Index has dragged its resistance points lower. Despite the weakness in the markets, there were few pockets that acted in a very resilient manner against the broader weakness. We can expect this resilience from these pockets to continue for the coming days. Select stocks from the broader midcap universe, PSE, Auto, Pharma, and Oil & Gas space may show great relative strength against the broader markets. We recommend selective purchases in this space. With selling getting over-done in the short-term, some respite through a technical pullback can be expected.
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)
