It was a day of th0rough consolidation in the markets; much on the lines of the analysis carried out in the previous note. It was mentioned that while the NIFTY may consolidate, the other indexes like Banks, Auto, and PSE may continue improving their relative strength against the broader markets. Much on these lines, the NIFTYsaw a positive and better-than-expected start to the day. However, it marked the day’s high in the opening minutes and then pared its gains to trade near the previous close. The index moved sideways in a very narrow range and took no directional call. It finally ended flat with a negligible gain of 1.90 points (+0.01%).
It was mentioned in the previous note that no up move shall occur unless the NIFTY moves past 17950; it was also mentioned that any slip below the 17800 levels will push the markets into consolidation. Nothing of the two events happened and this kept the markets indecisive and directionless. Going by the present technical setup, NIFTY is in a very narrow range of consolidation; for up move to continue, moving past 17950 will be crucial. On the other hand, any slip below 17800 will convert the present narrow-range consolidation into a defined broad-range consolidation.
Volatility spiked; INDIAVIX surged 6.68% to 18.0525. Tuesday will see the levels of 17900 and 17940 acting as possible resistance points. Potential supports come in at 17810 and 17730.
The Relative Strength Index (RSI) on the daily chart is 77.93; it stays in the overbought zone. RSI is neutral and does not show any divergence against the price. The daily MACD is bullish and trades above the signal line. Apart from a black body, no other formation was seen on the charts.
All in all, the analysis continues to remain on similar lines. It is expected with 17950 acting as resistance, NIFTY will continue to stay range-bound and consolidate. Only a slip below 17800 will make the present consolidation a bit wider. We recommend continuing to stay highly stock-specific and focus on those stocks and sectors that are continuing to improve their relative strength against the broader markets. Shorts, as of now, must be avoided. A cautious outlook 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)
