The equity markets continued to stay on tenterhooks as the geopolitical tensions refused to fade; it opened lower and ended the day on a negative note despite some pullback during the day. The NIFTY opened negative, it slipped further as the day progressed to form the low point of the day in the late morning session. After testing the low of 16133, the markets saw a significant recovery from the lower levels. NIFTY rebounded over 300-odd points from the low of the day. However, this recovery got sold into and failed to sustain itself during the day. The benchmark index NIFTY50 ended the day with a net loss of 252.70 points (-1.53%).
Over the past sessions, and more so on Friday, the markets have seen significant addition of fresh shorts across the board. The NIFTY current month futures have added over 1.71 lakh shares or 1.35% in net Open Interest. Since this increase in the OI has come along with the decline, we can fairly conclude that fresh shorts have been added to the system. If we draw an adjusted trend line, the levels of 16133 may act as the most immediate support levels for the markets. There is an evident scramble by the NIFTY to find a temporary base for itself; despite the geopolitical tensions and the broader trend staying downward, some technical pullback now remains overdue in the markets.
Volatility remained at elevated levels; INDIAVIX declined by a negligible 0.70% to 27.9575. The Monday is likely to see the levels of 16350 and 16480 acting as probable resistance points. The supports come in at 16150 and 16000 levels.
The daily RSI is 34.83; it stays neutral and does not show any divergence against the price. The daily MACD is bearish and stays below the signal line. Apart from a black body that occurred, no other formations were noticed on the charts.
The pattern analysis shows that despite double bottom support of 16400 getting violated, the adjusted trendline also hints at a mild possibility of Friday’s low of 16133 acting as potential support. It would be unfair to draw any conclusions merely looking at the trend lines as external factors may cause the technical levels to get violated. However, apart from this, some possibility of a technical pullback cannot be ruled out.
Over the coming days, the levels of 16130 will be crucial to watch. It is not only the most immediate low point but also the point where it tests the adjusted sloping trend line which may act as a support. The number of shorts that are seen being added every day also sets a stage for some technical rebound which stays imminent. If we do not have any fresh set of negatives to deal with, we can expect this technical pullback to happen at any time. In any case, it is reiterated to stay away from shorting the markets at current levels. While keeping fresh purchases limited, all profits should be protected vigilantly on either side of the move. A cautious view 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)
