For the most part of the session, the index traded with limited losses. The pullback grew stronger towards the end of the session. Nifty closed with just a minor loss of 33.45 points (-0.20%).
Market remained closed on Tuesday for a holiday.
From the technical standpoint, the highlight of the previous session was the ability of Nifty to keep its head above the crucial 17,000 level. As per the options data, this level continues to hold the highest amount of PUT OI. This is likely to lend support unless this point is comprehensively violated.
On the higher side, the maximum Call OI exists at 17,500. The market shall open after a gap of one day.
Though Nifty will adjust itself to the global trade setup, it remains largely stable. However, independent of the global trade setup if we look at just the technical levels, then keeping head above the 16,850-17,000 zone will be extremely crucial for Nifty to avoid any weakness.
Wednesday is likely to see the levels of 17,135 and 17,220 acting as potential resistance levels. The supports come in at 17,000 and 16,910 levels.
The Relative Strength Index (RSI) stands at 46.17. It stays neutral and does not show any divergence against the price. The daily MACD is bearish and stays below the signal line. A strong white candle appeared on the charts. Its appearance not only showed the directional consensus of the market participants, but it also showed the credibility of the support zone where it occurred.
All in all, regardless of the direction of Nifty’s move in either way, the market will remain in the congestion zone defined by the 16,850-17,500 area.
This 650-point zone is something that will not allow the markets to take any sustainable directional bias. A trending move will occur only if the higher level is taken out or the lower one is violated. Until then, regardless of the gap-up or a gap-down openings, the market will stay largely in a range.
It is strongly recommended that one continues to stay highly stock-specific while approaching the markets. A defensive approach with curtailed leveraged positions will prove to be highly risk-optimised given the present technical setup of the markets.
(Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founder of EquityResearch.asia and ChartWizard.ae (ChartWizard, FZE) and is based at Vadodara. He can be reached at firstname.lastname@example.org)