The Indian markets got a rude opening to the week as it opened on a negative note and closed even weaker by the end of the day. In the previous technical note, we had mentioned that the breakout is something that should not be anticipated or taken for granted, especially in the present technical setup. The NIFTY saw a weak opening in the morning. The Index traded sideways showing some resilience to the prevailing weakness. However, the second half of the session saw the markets getting weaker. The headline index finally ended with a net loss of 171 points (-1.07%).
Throughout the day, the level of 15800 saw heavy call writing; this strike price added over 4.9 million in Call OI. This saw the NIFTY’s resistance levels shifting lower from 16000 to 15800 as this point holds maximum Call OI followed by 15900. This means that this zone of 15800-15900 will pose serious resistance going ahead from here. On the lower side, near similar Put OI is seen between 15700-15500 zone. Volatility spiked as the INDIAVIX rose by 8.33% to 12.6800.
Monday’s session has inflicted some technical damage on the charts; the zone of 15900-15950 now becomes an intermediate top for the markets unless taken out convincingly. Tuesday is likely to see a tepid start to the trade, the levels of 15790 and 15845 will act as potential resistance points. The supports come in at 14700 and 14605 levels.
The Relative Strength Index (RSI) on the daily chart is 51.44; it stays neutral and does not show any divergence against the price. The daily MACD is bearish and trades below the signal line. A Doji occurred on the candles; however, more importantly, a falling window also occurred. This results out of a gap down and since this falling window candle occurred near the resistance point, it has reinforced the credibility of the resistance zone of 15900-15950 levels. Usually, such candle formation has bearish implications though they require confirmation on the next bar.
There are two distinct interpretations in the present technical setup. First, so long as the zone of 15900-15950 is not taken out convincingly, all up moves or pullbacks will stay vulnerable to profit-taking bouts at higher levels. Secondly, so long as 15450 levels stay defended, we will see the markets in a broad consolidation range. Given the present technical setup, we recommend continuing to approach the markets with a highly selective approach while protecting profits on either side of the trade.
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)
