Nifty: Trade Setup: Nifty likely to take a breather till it moves past the 17,950 level

Tuesday’s session turned out to be quite choppy. Nifty50 not only faced resistance at the levels we had mentioned in this column yesterday, but also saw some corrective activity. The market saw a positive start to the day, and Nifty50 marked its intraday high in the opening seconds of the session.

It soon pared the gains and traded flat near the previous close. Then selloff gripped the market after that and that not only pushed Nifty into the negative territory, but made it weaker as well. The index slipped below the 17,600 mark. However, the last hour of the session saw Nifty rebound over 160-odd points from the lows. It finally ended with a net loss of 106 points, or 0.60 per cent.

From the technical perspective, Tuesday’s session temporarily marked an intermediate top for the market in the 17,900-17,950 zone. For a fresh bounce to occur, Nifty will have to move past the 17,950 level convincingly. Until this happens, we will see the market, consolidating in a broad but defined range. Volatility continued to edge higher; India VIX rose by 2.67 per cent to 18.5350 level.

Wednesday’s session not only marks the penultimate day of September F&O series, but also the monthly derivative expiry. The market will stay influenced with rollover-centric activities over the next two sessions.

On Wednesday, the 17,800 and 17,845 levels act as key resistance points for Nifty, while supports should come in at 17,700 and 17,630 levels. The Relative Strength Index (RSI) on the daily chart stood at the 70.98 level; it remains neutral and does not show any divergence against the price.

The daily MACD has again reported a negative crossover; it is now bearish and below the Signal Line. A candle with a long lower shadow has emerged. The occurrence of such a candle near the high point may temporarily stall the bounce. However, this will also need the confirmation at the next trading bar.

With the market showing first signs of taking some breather and consolidating at higher levels, the 17,900-17,950 zone becomes an intermediate top and most crucial resistance zone. Unless this zone is taken out, no runaway rally can be expected for Nifty. We will see the broader market try to relatively outperform the frontline indices.

However, the texture of the market will get more stock-specific than it ever was. We can expect some sector-specific shows as well with sectoral indices for banking, PSUs, auto, etc. putting up a resilient show.

(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 milan.vaishnav@equityresearch.asia)