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  • Milan Vaishnav, CMT, MSTA

NIFTY Hangs Precariously In Balance Near Supports; Stares At A Overdue Technical Pullback

The equity markets continued to disappoint as the caution weighed heavy on the markets and the index ended the day with losses for the seventh session in a row. Despite a stable start to the day, the NIFTY remained under pressure and remained in a falling trajectory for the most past of the day with few feeble attempts to bounce back. Though the market breadth remained negative, it was relatively better. But still, the NIFTY ended the day with a loss of 83.45 points or 0.78%.

As we approach Tuesday, we are left with NIFTY hanging precariously in balance near its important supports. Also, good number of shorts were also seen being added as the net Open Interest increased by over 6.52 lakh shares. We expect a quiet start to the trade once again, but it would be now extremely important for the markets to keep its head above 620 at close level and crawl above 690 level to be back inside the broad trading range.

As we stare at an overdue counter-trend technical pullback, we expect the level of 10690 and 10745 to act as immediate resistance. Supports come in at 10620 and 10560 levels.

The Relative Strength Index (RSI) on the daily chart is 38.0215 and it has marked a fresh 14-period low which is bearish. It does not show any divergence against the price. The daily MACD stays bearish and trades below its signal line.

Speaking purely on technical terms, a technical pullback remains much overdue. To avoid any serious interim weakness, the NIFTY will have to keep its head above 10620 level on closing basis and move past 10690 to be back inside the trading range. The index hangs precariously in balance but still, it makes a good case for a technical pullback as it remains oversold on short term charts. With OI having increased significantly with the declines, there are large number of shorts which might lend support at any immediate lower levels. It is suggested to keep exposures modest, preserve liquidity and make highly selective purchases while protecting profits at higher levels.

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