It was a day of positive consolidation for the markets; the NIFTY opened on a weak note but soon managed to crawl back inside the positive territory in the first hour of the trade. After that, the NIFTY did not adopt any directional bias; it continued trading in a defined, capped, and limited range through the remainder of the day. It did not display strength on either side; just managed to maintain modest gains. In the end, the headline index finally ended with a modest gain of 35.55 points (+0.21%).
The markets are showing signs of an impending consolidation at current levels with the zone of 16900-17000 acting as a stiff resistance area. First, the NIFTY has pulled back over 1000-points in the last four sessions; secondly, the geopolitical tensions between Russia and Ukraine are far from showing any signs of getting over. This has kept the commodity and Oil prices high and the global economy is not going to escape the inflationary pressures because of this over the coming weeks. This will disallow the markets to stage a strong extension of the pullback without any consolidation at the current levels. In any case, the upsides win the market will remain capped in the 16900-17000 zone.
Monday is likely to see a soft start to the day. The levels of 16700 and 16785 act as potential resistance levels. The supports come in at 16500 and 16380 levels.
The daily RSI is 46.37; it is neutral and does not show any divergence against the price. The daily MACD is bearish and stays below the signal line. Apart from a white body that emerged on the candles, no other formations were seen on the charts.
The pattern analysis shows that after the most recent low point of 15671, the NIFTY has shown a pullback of over 1000-odd points. The NIFTY is below the 200-DMA which is presently at 16966. A pattern resistance of the lower edge of the bearish descending triangle that the NIFTY violated is near 16900 levels. This makes the levels of 16900-17000 a strong resistance area for the markets.
Overall, the markets are unlikely to see any major extension of the up move so soon; they are likely to trade in a defined range and stay potentially under a broad consolidation. The F&O data show some internal strength as NIFTY current month futures has seen over 4.25 lakh shares or 3.54% is added to the net open interest. The best method to navigate the present technical structure of the markets is to keep using the downticks to make select quality purchases. With each pullback, all profits must be vigilantly protected so long as the NIFTY is below the 16900-17000 zone. A cautious approach 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)
