After three days of strong gains, Tuesday saw the markets consolidate with positive bias as they ended the day with a modest cut. The markets saw a bit weaker-than-expected start to the day. However, after opening on a negative note, the NIFTY recovered from the opening lows; by afternoon, it recouped all its opening losses and went into the positive zone, The markets witnessed a sideways move until late afternoon; the last hour of the session saw the markets giving up and seeing some selling pressure again. The NIFTY closed the day with a net loss of 76.85 points (-0.46%).
In the session before the previous one, the NIFTY had seen a breakaway gap; usually, it was expected to continue with the move given the fact that such technical setups resolve with the continuation of the up move. Instead, the markets consolidated in a capped range. The NIFTY has formed a near similar top, i.e, 16690 as compared to 16695 in the previous session. This has converted the level of 16700 into an immediate resistance point for the index. For any sustainable extension of the up move to happen, moving past 16700 will be crucial; moving past this level comprehensively will open up some more upside for the markets.
Wednesday is likely to see the levels of 16650 and 17735 acting as potential resistance points. The supports come in at 16500 and 16430.
The Relative Strength Index (RSI) on the daily chart is 52.45; it stays neutral and does not show any divergence against the price. The daily MACD is bullish and trades above the signal line.
A spinning top emerged on the candles; such candles tend to have a small real body and display the tentative behavior of the market participants. There is also a Harami pattern seen as the present real body is completely engulfed by the body of the prior candle.
All in all, there are strong chances of the markets consolidating at current levels; however, the immediate technical structure remains strong and buoyant. So long as the NIFTY is above 16400; shorts must be avoided and all dips must be used to make select purchases at lower levels. It is strongly recommended that while avoiding shorts, stock-picking too should be done on a highly selective note. While staying stock-specific in approach, a cautiously positive 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)
