What seemed like a perfect technical pullback day for the markets turned disappointing as the NIFTY gave up all its gains to close the day on a modestly negative note. The markets saw a positive start to the day; and after an initial blip, grew stronger as the day progressed. At one point in time, the NIFTY moved past the crucial 16000-levels while it marked 16083.60 as a high point of the day. It was the last one and a half-hour of the session that did all the undoing for the markets. The NIFTY steadily gave up all the gains and slipped into the negative. After coming off over 340-points from the high point, the index ended with a negligible loss of 25.85 points (-0.16%).
From a technical perspective, NIFTY has been showing a great amount of weakness over the past several days. In nine sessions over the past two weeks, NIFTY has lost over 1340 points; presently it rests at very crucial support levels. While the Index trades well be all the three key moving averages, it is now in the oversold zone and rests at pattern support. It has defended the most recent low point of 15735; it would be crucial to see if the index is able to defend this point. The oversold condition of the markets may trigger pullbacks even if the NIFTY slips below 15735, but this even will make the NIFTY weaker from a technical perspective.
There are possibilities of a positive start to the day; sustaining the positive start, if any, will be equally important for the markets. Monday is likely to see the levels of 15860 and 15935 acting as potential resistance points. The supports come in at 15710 and 15620 levels.
The Relative Strength Index (RSI) on the daily chart is 26.87; it is now in an oversold area. It continues to show a mild bearish divergence against the price. The MACD is bearish and trades below the signal line. A black candle appeared on the charts; apart from this, no other major formation was noticed.
All in all, the NIFTY is oversold and rests on the pattern support. This is enough to cause a likely technical pullback. However, over the immediate near term, regardless of any technical pullback that happens or not, it would be crucial for the markets to keep their head above 15735 levels. Any violation of this point may trigger technical weakness in the near term. It is recommended that leveraged exposures must be kept at modest levels. All buying should be kept limited to low beta and defensive stocks. A cautious and selective approach is advised until a clear confirmation of a bottom being in place is seen on the charts.
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)
