Gemstone Equity Research & Advisory Services

Outlook For Wednesday: NIFTY Likely To Consolidate In A Range; May Attempt To Test This Level Again

After two days of strong short covering, it was a time to consolidate for the markets. The Indian equities traded in a range bound manner throughout the day and ended the day on a flat note without taking any directional call. After opening on a positive note, the NIFTY marked its intraday high point in the early minutes of the session. After that, the Index pared its morning gains to trade flat. For the rest of the day, NIFTY kept coming in and out negative territory. The oscillation in the narrow band continued until the end of the session as the headline index ended with a negligible loss of 5.15 points (-0.05%).

As the NIFTY opened today on a positive note, it resisted precisely at the 50-DMA which presently stands at 11304. Unless this level is taken out, the NIFTY will continue to resist to this level and consolidate with stiff resistance around this zone. The US Dollar Index is seeing some weakness again. Any overnight weakness will benefit the equity markets.  That being said, from the technical perspective, we can expect the NIFTY to consolidate with 11300 acting as an immediate resistance point. Volatility increased a bit as the INDIAVIX ended higher by 1.03% at 19.7750.

Wednesday will see the levels of 11300 and 11330 will act as immediate resistance points for the markets. The supports will come in at 11165 and 11070 levels.

The Relative Strength Index (RSI) on the daily chart is 47.84; it stays neutral and does not show any divergence against the price. The daily MACD is bearish as it trades below the signal line. However, the sharply narrowing slope of the histogram shows the indicator moving towards a positive crossover in the coming days. Apart from a black body that emerged, no other important formations appeared on the candle.

The level of 11200 Call has seen significant amount of Open Interest addition through the day.  There are possibilities that the NIFTY finds some support at this level in the short-term. However, it is unlikely that the NIFTY shows any major move on the either side and continue to consolidate and oscillate within a defined range. In the event of any resumption of the pullback, the Index testing the 50-DMA again cannot be ruled out. We recommend continuing to adopt a highly cautious and stock-specific approach while avoiding leveraged exposures in the market. 

Milan Vaishnav, CMT, MSTA
Consulting Technical   Analyst
Member: (CMT Association, USA | CSTA, Canada | STA, UK)  | (Research  Analyst, SEBI Reg. No. INH000003341)

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