The coming week will be a truncated one, with a market holiday on Friday for Maha Shivratri. Nifty has ended a notch below its crucial 50-DMA, which stands at 12,130, while the short-term 20-DMA is at 12,065.
The headline index saw long unwinding from higher levels, which is evident as the decline came with a reduction in net open interest. In all probability, the index has formed a lower top at 12,230, as evident from the daily chart.
Monday’s session is likely to see a soft start with 12,165 and 12,200 levels acting as resistance, while supports may come in at 12,070 and 12,035.
The Relative Strength Index (RSI) on the daily chart stood at 50.78 and stayed neutral, showing no divergence against the price. The daily MACD was bullish and traded above its signal line. However, it was showing deceleration in the current momentum.
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As per pattern analysis, after forming the current top at 12,430, Nifty has probably formed a lower top near 12,230 on the daily chart. Unless the index moves past the 12,230 level, there are little chances of any runaway rally.
All in all, in the immediate short-term, the price action of Nifty against 50-DMA will be crucial to watch out for. The index has ended just a notch below this zone, and any further weakness will increase the chances of the index testing its 20-DMA near 12,065.
The 50-DMA is expected to act as a support on a closing basis, and any violation of this level will invite some more weakness.
(Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founder of Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at [email protected])
