Technical Pullback Likely To Continue; Zone Between These Two DMAs To Act As Crucial Support
In a greatly volatile session, the Indian equity markets took a breather from the relentless downsides that it was witnessing and ended the day with a modest gain. After a negative start to the day, the equities traded in a sideways trajectory and the index moved nowhere while remaining in a capped range. A sharp up move was witnessed in the second half of the session which was followed by sharp selloff from higher levels. After a rebound again, the headline index NIFTY50 ended the day with gains of 73.85 points (+0.66).
From the technical perspective, the NIFTY defending the 100-DMA which is presently at 11131 is important. We expect the technical pullback to continue and the zone between 100-DMA and 200-DMA is expected to act as support-term support.
As we approach Wednesday’s trade, it is necessary that the markets show some improvement in market breadth as well. The previous rally has been purely on account of short covering and this needs to get replaced with some buy if the pullback has to sustain. The levels of 11265 and 11350 will act as immediate resistance point for the markets. Supports come in at 11130 and 11034.
The Relative Strength Index (RSI) on the daily chart is 36.2434. It has just bounced back from near the oversold area and remains neutral against the price. The daily MACD stays bearish and trades below its signal line.
While having a look at pattern analysis, it becomes evident that following a recent decline, the NIFTY has taken support at the 100-DMA level. This level is likely to act as immediate short term support for the markets.
With the current pullback, the NIFTY has ended its 9-day losing streak and has attempted to take some breather from the sharp declines that it witnessed over the past couple of days. The zone between the 100-DMA and 200-DMA, i.e. 11131 and 11034 is very critical support zone for the markets. So long as the markets are able to defend this zone, we can expect the technical pullback to continue. Any breach of this support zone is likely to inflict more weakness but give the present set of short-term technical structure, the chances of pullback continuing are higher. With volatility likely to remain ingrained in the session, we recommend a modestly positive outlook for the day.
Milan Vaishnav, CMT, MSTA, Consulting Technical Analyst Member: (CMT Association, USA / CSTA, Canada / STA, UK) | (Research Analyst, SEBI Reg. No. INH000003341)