Headline index Nifty opened with a gap-up and traded within a capped range in the morning. The index pared its gains to some extent in the middle of the trade but recovered to end close near the day’s high point. Nifty finally closed with a net gain of 232.40 points or 1.60 per cent.
ET CONTRIBUTORSFrom a technical perspective, it is important to note that the pullback has been on the back of heavy short-covering, as evident from the F&O data. Futures data shows that Nifty March futures have shed over 10.62 lakh shares, i.e., 14,713 contracts or 9.78 per cent in Net Open Interest. US bonds have shown some signs of a base formation; there are
possibilities that they improve a bit resulting in the softening of yields. Unless there is any kind of rout in bond prices, yields are very less likely to bother us in the immediate term. We would be governed more by technicals unless there is any specifically harsh overnight handover of the trade setup.
Tuesday’s session is likely to see the levels of 14,800 and 14,890 levels as potential resistance points, while support will come in at 14,700 and 14,635 levels.
The Relative Strength Index (RSI) on the daily chart stood neutral at 50.15 and did not show any divergence against price. The daily MACD was bearish and remained below its Signal Line.
A Bullish Harami pattern occurred on the charts. In yesterday’s note, we had mentioned that despite a falling window formation that results with continuation of the downtrend, it should be interpreted in isolation as it had occurred near a support of its 50-DMA. In the same breath, even the current Bullish Harami pattern should not be read in isolation as it has emerged near higher levels and without any significant preceding downtrend. It should be viewed neutrally and best ignored.
As we approach the coming session, it would be crucial to see if the market continues to be approached in a defensive and stock specific way. Nifty is currently in between its 50-DMA and short-term 20-DMA, which stood at 14,980. Even if the market sees any upside, it will continue remaining capped in its extent. We recommend avoiding chasing high beta stocks and use up moves, if any, to protect profits at higher levels.
(Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founder of Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at milan.vaishnav@equityresearch.asia)
