As mentioned in our previous columns, volatility had fallen to one of the lowest levels, which is not a good sign as it signals complacency among market participants. After this decline, INDIA VIX shot up 5.48 per cent to 26.3675. Tuesday’s session reinforced the 200-DMA, which currently stands at 10,881, as a major resistance for the immediate short term. Market breadth remained extremely weak, as 46 of the Nifty50 stocks ended with losses.
Given the kind of fall we saw on Tuesday, a minor pullback cannot be ruled out. The 10,635 and 10,670 levels will act as key points of resistance, while supports will come in at 10,550 and 10,470 levels.
ET CONTRIBUTORSOn the daily chart, the Relative Strength Index, or RSI, stood at 59.15. It marked a fresh 14-period low, which is a bearish signal. The RSI remains neutral, as it does not show any divergence against the price. The daily MACD has shown a negative crossover; it is now bearish as it trades below the signal line.
A large black body emerged on the candles. This is a significant formation, especially when it has occurred below the 200-DMA. The appearance of such a candle reinforces the credibility of 200-DMA as a strong resistance point.
The decline of stocks in Tuesday’s session was clearly due to long unwinding at higher levels, and it did not happen because of any addition of fresh shorts. This is evident as the decline seen in the previous session came with a drop of over 5.73 lakh shares, or 4.98 per cent in net Open Interest in Nifty futures. There are chances that mild pullbacks may happen in the short term, but they are equally likely to get sold later. In the event of any pullback, if at all they occur, they should be used to make exits as Nifty has sharply shifted its resistance points lower. A cautious view is advised for the day.
(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])
