Wednesday Trade Set-Up: This Inverted Hammer Need Confirmation On The Next Trading Day
While putting up extremely dismal show, the NIFTY slipped over 135 points from the high point to end yet another day with losses. With Tuesday’s negative close, the markets have ended in the red for the eighth consecutive day. The NIFTY failed to convincingly crawl above the 100-DMA level and faced corrective pressure from those levels. From what it seemed to be a strong pullback, the index ended with a net loss of 36.60 points or 0.34%.
We can once again expect a stable start to the trade. NIFTY is again likely to make attempts to give a long overdue technical pullback. Though the market breadth remained good, it will be important to monitor the breadth. Along with this, the price behavior against the 100-DMA which is presently at 10686 will be important to watch.
Tuesday will see the levels of 10685 and 10740 as immediate resistance area. Supports will come in at 10580 and 10510.
The Relative Strength Index (RSI) on the daily chart is 36.2730. RSI has marked a fresh 14-period low which is bearish, but it does not show any divergence against the price. The daily MACD remain bearish and trades below its signal line.
On the Candles, an Inverted Hammer emerged. This is a candle with a long upper shadow with no or very little lower shadow and a small real body. If this occurs during a downtrend which is the case with NIFTY, it signals a bullish bottom reversal; though it requires confirmation on the next trading day.
The NIFTY still remains in doldrums, but a technical counter trend rebound is overdue. All up-moves will find resistance at the 100-DMA which is presently at 10686. This also coincides with the rising trend line that the NIFTY has broken on the downside. This area of 10686-10720 will act as immediate resistance zone for the markets. The large number of shorts that are seen over past couple of days still continue to exist and we can expect support from them at lower levels. We suggest remaining selective on the stocks and keep exposures at modest levels. A cautious outlook is advised for the day.
Milan Vaishnav, CMT, MSTA, Consulting Technical Analyst Member: (CMT Association, USA / CSTA, Canada / STA, UK) | (Research Analyst, SEBI Reg. No. INH000003341)