In the previous technical note, it was pointed out that the Indian equities had been rising in a short-covering led rally and are due for some imminent correction. The session on Monday turned out to be precisely on the expected lines. The NIFTY opened on a modestly positive note. However, after a positive start, the markets stayed in the positive territory for some time after which it slipped into the negative zone. The markets continued to trade in negative territory but stayed in a limited range. It was in the second half of the session that the NIFTY lost some more ground rapidly. There was no meaningful recovery from the low point; the headline index finally ended with a net loss of 169.45 points (-0.98%).
The markets have shown some first firm signs of taking some breather after remarkable 1600-odd points of a technical pullback. Also, again on the expected lines, the NIFTY has resisted the 100-DMA which presently stands at 17370. This level, unless taken out convincingly on the upside, will continue to act as a major resistance on a closing basis. Apart from this, the weekly options data also indicate the zone of 17300-17500 to be acting as a stiff resistance area. The present technical structure fairly hints that all technical pullbacks from the current level will stay limited to 17300; beyond which the NIFTY will face very stiff resistance.
Tuesday is likely to see the levels of 17250 and 17335 acting as potential resistance points. The supports come in at 17000 and 16890 levels.
The Relative Strength Index (RSI) on the daily chart is 54.08; it stays neutral and does not show any divergence against the price. The daily MACD is bullish and stays above the signal line.
A bearish engulfing candle has emerged. The occurrence of such a candle after an up move and near the resistance point of 100-DMA adds credibility to this level as a strong resistance area for the NIFTY in the near term.
All in all, the nearest support as indicated by the Options data and also as indicated by the technical structure is the 200-DMA which is presently at 17005. There are brighter chances that the NIFTY oscillated in this 400-points range of 17000-17400 while it consolidates. If the index violates the 200-DMA then it is likely to invite incremental weakness. So long as the markets are between 17000-17400, it would not be prudent to take any major directional positions on either side. It is best suggested to stay highly stock-specific in making purchases and continue to protect profits at higher levels.
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)
