The Indian equities corrected for the fifth day in a row; Monday’s session remained extremely brutal as NIFTY violated the 17000-levels briefly before ending with a deep cut. The NIFTY saw a resilient opening as it opened just with a modest cut and soon recovered from the low point of the day. However, all through this, the Index stayed negative. After this brief resilience, the markets found themselves gripped in a deep corrective mode; it remained in a strong downtrend throughout the session as it kept marking gradual lows. At one point in time, the NIFTY briefly violated the psychologically important 17000-levels. It saw a brief rebound from there and finally ended the day with a net loss of 468.50 points (-2.66%).
After Monday’s close, the NIFTY has given up over 1200-points out of 1800-points of technical pullback it saw after testing the lows of 16400. In the process, the index now trades below the 20-, 50-, and 100-DMA levels. The current move confirms the onset of the secondary trend as the primary trend now remains evidently disrupted. However, some pullback should not come as a surprise as the NIFTY PCR across all expiries is below 0.70 and is now deeply oversold. However, the broader structure remains weak; all technical pullbacks may remain mild and the markets may consolidate at lower levels within a range.
Volatility spiked; INDIAVIX surged 20.85% to 22.8250. Tuesday is likely to see the levels of 17250 and 17325 acting as resistance points. Supports come in at 17050 and 16980 levels.
The Relative Strength Index (RSI) on the daily chart is 36.57; it has reached the lowest level in the last 14-days; however, it remains neutral and does not show any divergence against the price. The daily MACD is bearish and trades below the signal line. A strong black candle emerged; it depicts the bearish directional consensus of the market participants.
Monday’s session saw large Call writing at 17500 levels; the maximum Call Open Interest also stands at 17500 levels. This drags the resistance levels for the NIFTY much lower to this point; any technical pullback will find severe resistance at current levels. There are no triggers that signal an end to any weakness; at the same time, their chances of some technical pullback given the relentless selling that was witnessed over the coming days. It is recommended to avoid making aggressive purchases and at the same time avoid excessive shorts as well. It would be prudent to stay away until a clear directional bias is established. While keeping exposures extremely modest levels, a highly cautious 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)
