Nifty opened on a higher note and marked the high point of the day in the early minutes of trade. It slowly gave up gains and slipped into the negative territory by afternoon. While it made its low point in the late afternoon trade, Nifty still kept its losses modest. The headline index finally ended with a modest loss of 69.85 points (-0.41%).
Nifty’s coming off from higher levels; more importantly, the staying of the Index below the 100-DMA reinforces this point as a major resistance point going ahead. With 100-DMA at 17,351, Nifty will not have any sustainable upside unless these levels are taken out convincingly.
We have weekly options expiry coming up as well. Options data suggest maximum Call OI at 17,500 levels followed by 17,300 levels. The options data helps us fairly conclude that unless the zone of 17,350-17,500 is taken out convincingly, there are greater possibilities of the markets facing corrective pressure at higher levels.
Thursday is likely to see the levels of 17,300 and 17,365 acting as resistance points. The supports come in at 17,200 and 17,030 levels.
The Relative Strength Index (RSI) on the daily chart is 55.67. It continues to remain neutral and does not show any divergence against the price.
The daily MACD is bullish and above the signal line. A dark cloud emerged on the candles. Apart from this, no other formation is observed.
Pattern analysis shows that while Nifty has resisted the 100-DMA which stands at 17,351, it is just a notch above the 50-DMA which is at 17,225.
If this level is also violated, we may see the markets finding themselves in pressure with each technical pullback that it may see in future.
All in all, even if the markets attempt some move on the upside again, all such moves must be utilised to protect profits rather than making fresh purchases.
All new purchases must be kept highly stock-specific in nature and aggressive buying must be avoided. Unless Nifty assumes any directional move above 17,500 or below 17,000, this 500-point range remains a consolidation zone for the index.
In the absence of any directional bias, a highly stock-specific and selective approach is advised for the day.
(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@example.com)