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Outlook For Wednesday: NIFTY Shows Some Fatigue At Current Levels; Ensure Vigilant Profit Protection At Higher Levels

The NIFTY marked a fresh incremental high today that of 15778.80 today, but the markets largely consolidated while it ended the day with a nominal loss. After opening on a modestly positive note, the NIFTY marked its day’s high in the very early minutes of the trade. The index soon slipped in the negative territory and also formed its intraday low point in the morning session. The entire session was spent after that in a very limited and narrow range; the NIFTY saw itself gradually recovering from its low point. At one point in time, the Index recovered all of its day’s losses. It finally ended with a small loss of 11.55 points (-0.07%).

NIFTY has been marking incremental highs; however, over the past two or three sessions, it is lacking the strength that had earlier and it is showing some signs of fatigue. The levels of 15800 and 16000 is continuously seeing high amount of Call OI open additions; this shows that the upsides on the markets are capped for the immediate short term. The volatility continued marking new lows; INDIAVIX declined by another 2.20% to 15.2250. Needless to mention, this remains at the lowest levels seen only in early 2020.

NIFTY may see flat to mildly tepid start to the day. The levels of 15800 and 15830 are likely to act as resistance points; the supports will come in lower at 15650 and 15480 levels.

The Relative Strength Index (RSI) on the daily chart is 71.46; it remains in the overbought zone. RSI also continues to show a mild bearish divergence against the price. The daily MACD is bullish and remains above the signal line. A candle with a long lower shadow emerged on the charts. The occurrence of such a candle near the high point is a hint at a likely loss of momentum at higher levels.

The defensive undertone was evident in Tuesday’s session as the financial services and the banking stocks underperformed. On the other hand, there was strong demand in select consumption and pharma stocks which are a defensive play. It is much likely that such trade setup may persist for some time in the immediate short-term.

All in all, we reiterate the need to approach the markets with a high degree of caution. We recommend that while we follow the momentum, strict trading stop-losses should be kept in place to ensure optimal protecting of profits at higher levels.

This was first published by The Economic Times.

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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