The market had a subdued but positive start to the day but pared all opening gains in the first hour itself. The index then slipped into the negative zone briefly, only to take a U-turn. Nifty went on to show a strong pullback while marking its intraday high point at 11,854. However, the remaining part of the session saw gradual paring of those gains. The index finally ended the day with a net gain of 32.10 points or 0.22 per cent.
Nifty is now placed at a very crucial juncture. It is still below the short-term 20-DMA which stands at 14,797. However, it appears to have taken support at a basing trend line pattern resistance. The low of 14,651 would be important to watch out for in the immediate short term. Nifty will have to stay above this point to avoid further weakness. Volatility remained unchanged after a massive spike yesterday, it came off just 0.95 per cent to 25.2275.
As we enter the penultimate day of expiry of the current derivative series, expect the session to stay dominated with rollover centric activities. The levels of 14,790 and 17,845 will act as resistance points, while support will come in at 14,650 and 14,565.
The Relative Strength Index (RSI), on the daily chart, stood neutral at 49.36; it did not show any divergence against price. The daily MACD was bearish and stayed below its Signal Line. A small black candle occurred on the charts; apart from which no other significant formation was noticed.
Though Nifty ended in the positive territory, it was the sixth day in a row where the market closed lower than its opening level. The Bollinger bands had gone much wider than normal, indicating higher than normal volatility. The sharp deviation from the mean led to the corrective action.
Nifty’s staying above 14,650 is crucial as it is an immediate pattern support point. If the current supports are broken, it would be no surprise if the index tests its 50-DMA, which is currently placed at 14,368. The market is exhibiting highly tentative moves in the process of finding a short-term support. We reiterate staying light on positions and continue adopting a selective approach while vigilantly protecting 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 firstname.lastname@example.org)