On a thoroughly disappointing day of the trade, the NIFTY gave up all its gains in the last hour and a half of the session and closed in the negative. The markets saw a positive opening; they pared their gains to trade flat in the first 30 minutes of the session. The markets recovered again and kept marking incremental highs as it stayed in an upward rising trajectory. The index was seen trading comfortably higher than the crucial 200-DMA levels. Suddenly, in the late afternoon trade, a strong selling pressure gripped the markets. The NIFTY not only pared all its gains but slipped significantly into the negative territory. The headline index finally closed with a net loss of 142.50 points (-0.83%).
Markets are presently at crossroads; on one hand, the NIFTY has failed to sustain and keep its head above the 200-DMA which presently stands at 17225. On other hand, the index added a significant number of short positions on Friday as evident from the derivatives data. The NIFTY current month futures have added over 2.95 lakh shares or 3.47% in Open Interest. The addition of OI along with the decline in NIFTY hints at the addition of fresh short positions. Also, the zone of 16850-17000 continues to act as a strong pattern support level as well. All this is likely to keep NIFTY in a broad range as they are likely to lend support to the markets at lower levels.
Monday may see a negative start to the week; however, it may so happen that the NIFTY starts on a weaker note but see some stability going ahead. On Monday, we can expect the levels of 17180 and 17265 to act as resistance points. The supports are expected to come in at17060 and 16950 levels.
The Relative Strength Index (RSI) is 46.82; it remains neutral and shows no divergence against the price. The MACD is bearish and trades below the signal line.
A large bearish engulfing pattern is seen on the candles. This has emerged after some downtrend; it may lead to some potential reversal from current levels. However, it is important to note that it will require confirmation on the next subsequent bars.
Going purely by the pattern analysis, in any case, for the index to stage a sustainable up move, it will have to move past the 200-DMA levels. Until this happens, the markets stay prone to profit-taking bouts from higher levels. The current technical structure also suggests that unless the levels of 17300 are taken out convincingly or if the NIFTY violates the 16850-17000 zone, we will not see the markets taking any directional bias.
Overall, we recommend continuing to stay selective while approaching the markets. Markets are presently in a trading zone; they may oscillate back and forth in the given range and may not take any directional bias unless the upper or the lower range is taken out or violated. It is recommended to stay light on positions while keeping exposures focused on low beta and defensive stocks.
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)
