Outlook For Wednesday: Markets Face Stiff Overhead Resistance; Trade May Remain Broadly Range-bound
In a mostly volatile session of trade on Tuesday, the Indian equities ended in the red after oscillating within a defined range. The markets saw a positive start to the day, but after trading briefly in the positive territory, the Index slipped into the red. The first half of the session saw the NIFTY testing its intraday lows. The markets saw a sharp recovery from the low point of the day but failed to capitalize on the pullback. After some volatile moves, the headline index ended the day losing 36.90 points (-0.33%).
Despite the intermittent pullbacks that the markets are showing intraday, it is lacking the strength and the conviction that is required to sustain the pullbacks and capitalize on that going ahead. The NIFTY has resisted to the 20-DMA, and the zone between 20-DMA and the 200-DMA will continue to pose serious resistance to the markets over the coming days.
While expecting a quiet start to the trade on Wednesday, we expect the levels of 11080 and 11165 to act as resistance. Supports are expected to come in at 10980 and 10935.
The RSI on the daily chart is 41.0473; it remains neutral and does not show any divergence against the price. The daily MACD continues to stay bullish and trade above its signal line. No significant formations are seen on the Candles.
The pattern analysis shows that the NIFTY appears trapped in a broad trading range after breaching the neckline of the rounding top formation. The break below the neckline formed a low near 10780, and the pullback halted itself near the 200-DMA. A broad trading range is created in this area.
All and all, we will see the markets trading in a broad range and is not expected to set any directional foot in motion. We will see the markets attempting sharp moves, but the higher levels will find stiff overhead resistance and sustainability of the NIFTY at higher levels will be a question unless the zone between the 20-DMA and the 200-DMA is taken out. We recommend maintaining a modest exposure while avoiding aggressive bets. Volatility is likely to increase over coming days, and we reiterate maintaining a cautious view on the markets.
Milan Vaishnav, CMT, MSTA, Consulting Technical Analyst Member: (CMT Association, USA | CSTA, Canada | STA, UK) | (Research Analyst, SEBI Reg. No. INH000003341)