The markets saw a much better and resilient opening to the trade and spent the morning session trading in a sideways trajectory.
It gained some strength in the afternoon and maintained modest gains. However, the last hour of the trade saw some corrective moves happening in the markets. The Nifty pared its gains and slipped into the negative territory. After a modest recovery, the headline index closed with a modest loss of 61.80 points (-0.38%).
From a technical perspective, it is a good sign that the index has defended the previous low. In a way, it has validated the support trend line seen on the chart. Also, if the Nifty is able to make some technical pullback, it may well have placed some potential bottom in place.
For the immediate short term from hereon, it would be extremely crucial for the index to defend the 16,000-16,150 support zone to avoid any incremental weakness.
Volatility inched a little higher as India VIX was up by 1.23% to 22.3025. Wednesday is likely to see the levels of 16,300 and 16,410 acting as potential resistance points. The supports come in at 16,180 and 16,100 levels.
The Relative Strength Index (RSI) on the daily chart is 32.85. It remains Neutral and does not show any divergence against the price.
The daily MACD is bearish and stays below the signal line. A Doji emerged on the candles — the occurrence of such a candle near the support area hints at a potential bottom.
However, any candle must not be traded in isolation, and one must look out for confirmation on the charts going ahead.
The analysis for the coming session remains more or less on similar lines. It would be crucial to focus on the lower levels.
It would be important for the Nifty to hold on to the support zone of 16,050-16,150. Apart from this, it is also expected that the midcaps may see some relative outperformance against the large caps.
Overall, the markets may remain highly stock/sector-specific in nature. We are expected to see traction in IT, pharma, consumption, and select midcap stocks.
It is recommended that so long as the Nifty is above 16,000 levels, shorts much be strictly avoided. A selective approach is advised for the day.
Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founder of EquityResearch.asia and ChartWizard.ae and is based at Vadodara. He can be reached at firstname.lastname@example.org