The markets approached their key resistance levels after a strong start and ended the day with a minor loss after coming off their highs. The Nifty saw a stable start to the day on the expected lines, and after an initial blip, it stayed in the upward rising trajectory.
The index kept marking incremental highs for the major part of the day; by afternoon, it attempted to move past the crucial 16,400 levels. The testing of this resistance point invited some selling pressure. The index pared all its gains to slip into the negative.
After coming off over 200+ points from its high, the benchmark index closed with a minor loss of 51.45 points (-0.32%).
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The markets have formed a trading range between 15,700-16,400 area. 16,400 remains a major resistance area as it marks a gap above that point that the index had formed following a gap-down opening. For the technical pullback to continue, the gap between 16,400 and 16,650 needs to be filled. Until that happens, 16400 will continue to act as a resistance point for the markets.
The weekly options data also suggest stiff resistance at 16,400-16,500 levels. This means that Nifty’s price behavior against 16,400 will be crucial to watch.
Tuesday, again is likely to see a stable start provided there are no overnight negatives to deal with. The levels of 16,350 and 16,430 are expected to act as potential resistance points. The supports come in at 16,105 and 15,950 levels.
The Relative Strength Index (RSI) on the daily chart is 43.51. It stays neutral and does not show any divergence against the price. The daily MACD has shown a positive crossover and is now bullish and above the signal line. Apart from a black body that emerged, no other major formation was seen on the chart.
The pattern analysis shows that a gap was created following a gap down at the beginning of May and the price action on Nifty after that has seen a creation of a trading range between 16,400 and 15,700 on the lower side. The markets will stay in this range and will find resistance at 16,400 unless that level is taken out and the gap is filled that exists between 16,400-16,650 levels.
It is reiterated that the markets must be approached on a highly selective note. Looking at the present technical setup, there are greater possibilities of the technical pullback getting extended and 16,400 getting taken out eventually.
However, until expiry, the levels of 16,400-16,500 may act as a stiff resistance to the markets. This makes it necessary that while markets may be approached cautiously, all profits must also be protected at higher levels while maintaining a cautiously positive view 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 [email protected])
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
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