On a much weaker day of trade, the Indian equity markets opened with a gap down, grew weaker as the day progressed, and ended the day with a deep cut after some recovery from the lower levels. The markets had one day of global trade to adjust; Thursday was a trading holiday for India while the global markets were trading. Following a weak global trade setup, the NIFTY opened with a gap down and marked the low point for the day in the afternoon session. The intraday range for the markets was quite capped and limited; some modest recovery was seen at lower levels. The headline index finally ended the day with a net loss of 302 points (-1.73%).
There are a couple of things that show that the NIFTY maybe now staring at some imminent short covering led bounce from the current levels. The index has ended near the 50- and 200-DMA which presently stand at 17157 and 17164 respectively. The NIFTY has closed a notch above this point; it has held both these DMAs as of now as its support on a closing basis. Secondly, for the second trading session in a row, the NIFTY has piled up significant short positions. This was evident as the NIFTY April futures have added over 2.94 lakh shares or 3.07 in net OI. The addition in OI along with the decline for the second day in a row shows a continued build-up of shorts in the system.
Tuesday may see the markets trying to find some base for themselves. The levels of 17330 and 17400 will act as probable resistance points; the supports come in at 17150 and 17000 levels.
The daily RSI stands at 45.52; it has marked a new 14-period low which is bearish. However, RSI is neutral and does not show any divergence against the price. The daily MACD is bearish and stays below its signal line. A falling window occurred on the candles which was a result of a gap-down opening in the markets.
All in all, regardless of the technical pullback, which is now imminent and can happen any time, closing of the NIFTY above 17150 will be extremely important. If the NIFTY is able to keep its head above this point on a closing basis, it will hold on to 200-DMA as its support on a closing basis. Given the amount of addition of fresh short positions, it is strongly suggested to refrain from creating shorts. All down moves must be utilized to accumulate low beta stocks on a selective note. A cautiously positive view 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)
