The equity market took a corrective turn after extending some gains over the previous close and ended the day with a cut. Nifty opened on a positive note and formed its intraday high point in the early minutes of the trade. After that, it traded sideways in a capped range while not taking any major directional cue.
By afternoon, the index traded on a flat note. It was in the second half that the market took the turn for the worse as it witnessed a sharp corrective move. Nifty went on to lose over 372 points from its high point of the day. Following some modest recovery from the lower levels, the index ended with a net loss of 208.30 points (-1.23%).
Although the trading range has been wider looking at the quantum of Nifty coming off from its highs, it has stayed within a technically defined trajectory. To sum up the technical structure of the market, it shows that no meaningful upmove shall occur so long as Nifty is below the 16,900-17,000 levels.
The 200-DMA, which presently stands at 16,981 is also a major resistance on a closing basis. The strikes of 17,000 shows the highest accumulation of the Call OI as per the weekly options data.
Wednesday is likely to see 16,730 and 16,800 levels acting as potential resistance points. The supports are expected to come in at 16,550 and 16,480 levels. The trading range may continue staying wider than usual over the coming days.
The daily RSI is 47.15. It stays neutral and does not show any divergence against the price.
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The daily MACD is bullish and remains above the signal line. The large black body emerged which reflected the directional consensus of the market participants. Apart from this, no other formations were observed.
The market is presently in a no-trade zone so long as it stays between 16,500-17,000 levels. The reason for this is that Nifty has a major pattern resistance near 16,800-16900 in form of the lower edge trend line of the bearish descending triangle that it violated. On the other hand, with 200-DMA at 16,981, the zone of 16,900-17,000 makes up a major resistance zone for Nifty.
It is recommended to continue approaching the markets on a highly selective note. Positions on either side should be kept limited and exposures should be curtailed. While doing so, it would be prudent to vigilantly protect profits at higher levels.
(Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founder of EquityResearch.asia and ChartWizard.ae (ChartWizard, FZE) and is based at Vadodara. He can be reached at [email protected])
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