The markets approached their key resistance levels after a strong start and ended the day with a minor loss after coming off their highs. The NIFTY saw a stable start to the day on the expected lines, and after an initial blip, it stayed in the upward rising trajectory. The NIFTY kept marking incremental highs for the major part of the day; by afternoon, it attempted to move past the crucial 16400 levels. The testing of this resistance point invited some selling pressure; the index pared all its gains to slip into the negative. After coming off over 200+ points from its high, the benchmark index closed with a minor loss of 51.45 points (-0.32%).
The markets have formed a trading range between 15700-16400 area; 16400 remains a major resistance area as it marks a gap above that point that the NIFTY had formed following a gap-down opening. For the technical pullback to continue, the gap between 16400 and 16650 needs to be filled. Until that happens, 16400 will continue to act as a resistance point for the markets. The weekly options data also suggest stiff resistance at 16400-16500 levels. This means that NIFTY’s price behavior against 16400 will be crucial to watch.
Tuesday is once again likely to see a stable start provided there are no overnight negatives to deal with. The levels of 16350 and 16430 are expected to act as potential resistance points; the supports come in at 16105 and 15950 levels.
The Relative Strength Index (RSI) on the daily chart is 43.51; it stays neutral and does not show any divergence against the price. The daily MACD has shown a positive crossover; it is now bullish and above the signal line. Apart from a black body that emerged, no other major formation was seen on the chart.
The pattern analysis shows that a gap was created following a gap down at the beginning of May; after that, the price action on NIFTY after that has seen a creation of a trading range between 16400 and 15700 on the lower side. The markets will stay in this range and will find resistance at 16400 unless that level is taken out and the gap is filled that exists between 16400-16650 levels.
It is reiterated that the markets must be approached on a highly selective note. Looking at the present technical setup, there are greater possibilities of the technical pullback getting extended and 16400 getting taken out eventually; however, until expiry, the levels of 16400-16500 may act as a stiff resistance to the markets. This makes it necessary that while markets may be approached cautiously, all profits must also be protected at higher levels while maintaining a cautiously positive view of the markets.
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)
