On much-anticipated lines, the Indian equity markets made a hard attempt to find a temporary base for themselves. It recovered from its low point to end the day with gains. The markets saw a negative start to the day; the index, however, crawled inside the positive territory after a weak start. NIFTY failed to sustain itself in the positive zone; a corrective move followed, and the markets found themselves under some selling pressure once again. It was the last two hours of the trade that saw the markets staging a strong rebound from lower levels. NIFTY pulled itself back, recouped all the losses, and moved in the green. It continued to pile up gains as it rebounded over 330-points from its low point. The headline index finally ended with a net gain of 150.30 points (+0.95%).
It was mentioned in the previous technical note that the immediate low point of 15711 needs to be protected. This level was violated intra-day, but the markets have managed to pull themselves back. This makes the point of 15700 a particularly important support level over the immediate short term. The strikes of 15900 and 16000 saw over 1 million Put OI being added; however, the maximum PUT OI still stands at 15800 levels for the next weekly options expiry. The recent move has made some room for the markets to extend their technical pullback and test the levels of 16150-16200; the support zone in form of the trend line that the NIFTY violated on its way down. This zone may offer some resistance to the NIFTY when it tries to pull itself back.
Wednesday is likely to see the levels of 16150 and 16195 acting as probable resistance points. The supports come in at 15900 and 15830 levels.
The Relative Strength Index (RSI) on the daily chart is 33.97; it is neutral and does not show any divergence against the price. The daily MACD is bearish and stays below the signal line.
A strong bullish engulfing candle has appeared on the charts. This has occurred after a significant prior downtrend; the occurrence of such a candle may lead to a formation of a potential reversal point. This will require confirmation and will also need the level of 15700 to stay protected.
The relief rally was a technical pullback fueled by a short-covering led bounce. However, it would be crucial to see if this is replaced with fresh buying at current levels. If the current technical pullback extends itself, it has room on the upside to test 16150-16200 levels. On the expected lines, the pockets like metals, oil and gas, took a breather while few good consumption, IT, and Auto stocks saw some rebound from lower levels. It is reiterated to avoid shorts and pick good quality stocks at current levels. A cautiously optimistic 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)
