In a thoroughly disappointing start to the fresh week, the Indian equity markets remained under a strong bear grip as they ended the day on a negative note. The NIFTY opened on a flat note; it went very briefly in the green in the early seconds of the session only to slip quickly in the negative. The NIFTY kept gradually declining and remained in a falling trajectory until late afternoon. The decline, at one point in time, stopped and the markets made a modest attempt to recover. However, with just a small amount of recovery, the headline index closed in the red with a net loss of 302.70 points (-1.73%).
The technical structure of the market remains predominantly weak; even if a technical pullback occurs, there are now greater chances for the NIFTY testing the pattern support zone of 16900-17000 levels. Monday’s session saw large call writing taking place at 17300, 17400, and 17500 strikes. This zone is now expected to act as strong resistance for the markets. As of today, maximum Put OI exists at 17000 followed by 16900 levels.
For the markets to stage any significant technical pullback, keeping their head above 17000 would be crucial. The volatility shot up; INDIAVIX surged 8.15% to 20.4375.
Tuesday is likely to see the levels of 17245 and 17330 acting as crucial resistance points. The supports come in at 17100 and 17000 levels.
The Relative Strength Index (RSI) is at 42.20; it continues to be neutral and does not show any divergence against the price. The daily MACD is bearish and stays below the signal line. A large black body emerged on the candles; this not only reflects the bearish directional consensus of the market participants but also adds to the credibility of the 50-DMA as a resistance point.
The pattern analysis shows that the NIFTY has pattern support in form of a confluence point created by two trend lines. This point falls near 17000; this makes the zone of 16900-17000 a strong potential support zone for the NIFTY. If this is violated, it will open up some more gaps on the downside towards the 200-DMA which presently stands at 16729.
The NIFTY PCR across all expiries stands at 0.70 which is considered oversold. All in all, there is some room for a technical pullback in the markets; however, there will be no change of trend until and unless the NIFTY moves above 17500 again. We recommend avoiding any aggressive positions in the markets; while avoiding excessive leveraged exposure, all profits on either side should be vigilantly guarded unless there are some visible signs of stability in the markets. 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)
