The index had a relatively resilient opening and recovered its opening loss in the early part of the session to trade flat. However, it pared the recovery again to trade negatively. Just when the most part of the session was spent with a limited loss, the last hour of the trade saw intensified selling pressure coming in which took Nifty much lower. Following some recovery from its low point, the benchmark index ended the day with a net loss of 142.65 points or 0.95 per cent.
ET CONTRIBUTORSThe previous session saw the index oscillating within a 230-point range. Along with declines seen in the previous two sessions, Nifty futures added significant amount of Open Interest. The heavy addition in OI along with the decline in Nifty hints at creation of shorts and this may lead to some temporary technical pullback going ahead. Volatility spiked again as India VIX rose by 5.84 per cent to 25.5600. Going ahead from here, despite some temporary technical pullback that cannot be ruled out, Nifty is bound to find resistance in the 15,200-15,275 zone.
Monday’s session is expected to have a stable to positive start to the day and some short covering led upsides cannot be ruled out. The levels of 15,155 and 15,190 will act as resistance levels, while support will come in at 14,860 and 14,810 levels.
The Relative Strength Index (RSI) on the daily chart stood neutral at 52.37; it did not show any divergence against price. The daily MACD was bearish and stayed below its Signal Line. A Spinning Top occurred on the candles. Such Spinning Tops are formed in those sessions which have little difference between their open and close levels, and have a small real body. This indicates a lack of consensus between market participants and highlights their indecisive behavior.
All in all, some technical pullback is expected in the initial trade. However, initially if at all it happens, it would be a case of short covering and it would be crucial to see if fresh buying in the cash market is seen or not. Otherwise, such technical pullback may remain limited in its extent. We recommend avoiding any major exposures on either side unless a directional bias is established and some clear sign of continuation of any trend of consolidation are seen. Until this happens, it would be prudent to stay extremely light on overall exposures while vigilantly protecting profits on either side.
(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)
