The Indian equity markets continued to trade precisely on the analyzed lines; they tested the supports mentioned in the previous technical note and rebounded from there to end the day with a modest gain. The NIFTY saw a positive start to the day; it soon slipped in the negative territory after the initial minutes of the trade. An incremental and intense corrective pressure saw the NIFTY going very near to the 17000-mark as it tested the low of 17043.65. A strong recovery was seen and the NIFTY recouped all its losses to move back inside the positive territory. The index kept oscillating in a 120-odd points range; it finally managed to end in the positive while posting a net gain of 53.15 points (+0.31%).
From the technical perspective, the NIFTY has shown some signs of the formation of a potential base. The low point, from where the NIFTY rebounded is very near to the confluence area of two patterns supports that exist near the 17000 levels. With the NIFTY rebounding from these levels, the levels of 17000 continue to remain a crucial support level for the NIFTY. The Index options data also suggests continued highest Put OI accumulation at 17000 levels; this indicates the continued existence of this level as an important and immediate support for the NIFTY.
Volatility came off a bit; INDIAVIX declined by 3.68% to 19.6850. Wednesday is likely to see a stable start to the day. The levels of 17300 and 17410 are likely to act as potential resistance points; the supports come in at 17150 and 17100 levels. The trading range is expected to remain a bit wider than usual.
The daily RSI stands at 43.59; it is neutral and does not show any divergence against the price. The daily MACD is bearish and below the signal line.
A long-legged Doji is formed on the Candles. Any long-legged candle or the one with a long lower shadow is a sign of a potential formation of a base if it occurs near a support area. The present candle has formed a potential reversal point, of course, subject to confirmation on the next bar.
The weekly options data also show the highest Call OI accumulation at 17500 levels. Theoretically speaking, NIFTY has the potential to go up to that level. However, the levels of 17300 also saw a significant amount of Call writing taking place. This means that for the markets to successfully create a base and stage a technical rebound, moving past 17300 will be crucially important. NIFTY’s price action against the level of 17300 will be crucial to watch. In any case, it is recommended that creating shorts must be avoided. While staying highly selective in making fresh purchases, a cautious outlook 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)
