In the previous technical note, it was mentioned that the NIFTY has been testing the pattern support for the last two days; the oversold nature of the markets makes a larger case for a technical pullback. The markets finally got its long-awaited strong technical pullback where the NIFTY opened positive and stayed in the upward rising trajectory for the entire session. The move was robust and across the board; as the NIFTY kept marking fresh incremental highs throughout the day, the headline index closed on a very strong note posting a strong gain of 417 points (+2.63%).
The NIFTY finally saw a strong rebound from the Double Bottoms pattern support. The index has also held and validated the support area of 15700-15750 levels on the charts. This zone stays as strong near-term support for the markets as of now; these levels will have to be protected if the markets have to extend their pullback and avoid any incremental weakness from creeping in again. The pullback was across the board as all the 50 stocks of NIFTY50 ended with gains. The broader market breadth also remained very strong on the anticipated lines.
Wednesday is likely to see the levels of 16330 and 16485 acting as immediate resistance points. The supports come in at 16160 and 16030 levels. The trading range is likely to stay wider than usual.
The Relative Strength Index (RSI) is at 40.86; it has crossed above 30 from an oversold situation which is bullish. It remains neutral and does not show any divergence against the price. The daily MACD is still bearish and below the signal line.
A large white candle appeared on the chart. This points at a strong move on the upside and also shows the directional consensus of the market participants that dominated the trend for the day.
All in all, from a technical perspective, the NIFTY has held and validated the support zone of 15700-15750 levels. This zone is expected to lend strong support to the markets in the near term. Apart from this, if the technical pullback continues, the zone between 16480-16620 will need to be watched as this is a gap that was created a couple of days back. In other words, if the technical pullback continues, the NIFTY may find resistance at 16480-16500 levels in the immediate near term.
It is strongly recommended that rather than chasing any particular sector or a theme, one must continue staying highly stock-specific while approaching the markets. It would be rewarding to focus on the stocks which show a confirmation of some bottom in place and are showing improving relative strength against the broader markets. A cautiously positive 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)
