The Indian markets weren’t spared from the negative technical trade setup of the global markets. Following a weak overnight trade setup, the Asian markets traded weak in the morning. Because of this, the Indian markets too had a gap-down opening. However, on the expected lines, the NIFTY did recover over 250-odd points from the low point. Just when it seemed that the Indian markets are once again putting up a resilient show, the markets were gripped under a fresh wave of weakness. The NIFTY again slipped over 200-odd points and ended near the low point of the day again. The headline index closed with a net loss of 188.25 points (-1.07%).
Markets have come off 400-points from their high point; may now look at some stability and make some attempts to stabilize themselves. The price action of NIFTY against the level of 17450 will be extremely crucial. It will be very important for the NIFTY to crawl back above 17450 to avoid any further weakness. If this does not happen, then the possibility of the NIFTY testing the 17200-17250 zones cannot be ruled out. We may see the markets attempting to gain some stability; the NIFTY PCR across all expiries stands at 0.98 which is quite healthy. The volatility spiked, INDIAVIX rose 14.84 % to 17.4925.
Tuesday may see a jittery start to the day. The levels of 17450 and 17535 will act as potential resistance points; the supports will come in at 17350 and 17280 levels.
The Relative Strength Index (RSI) on the daily chart is 67.93; it has slipped below 70 from an overbought zone. The daily MACD has shown a negative crossover; it is now bearish and trades below the signal line. A candle with a long upper shadow occurred. This reflects that the markets were unable to sustain themselves at the high levels of the day.
The pattern analysis shows a sharp retracement after the markets tested their high point. In the process, it has slipped slightly below its most immediate support and basing point at 17450. If the NIFTY does not crawl above this point again, it may continue to see some modest weakness on the charts.
All in all, we recommend avoiding aggressive shorts at current levels because of more than one reason. The NIFTY has just shown retracement from its high point; there is no sign of any structural damage on the chart or something that shows a change of trend. Also, the decline has come with large addition in the current month’s future series. This indicates that there are a large number of shorts that are added to the system. We recommend avoiding aggressive exposures on either side and look for some stability before initiating fresh purchases. While continuing to stay light on positions, a selective approach with 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)
