In a yet another disappointing session on Tuesday, the NSE benchmark Nifty violated the major support zone at 10,180-10,250. Despite making a modest recovery towards the end, the index still ended 98.45 points or 0.96 per cent down. The global markets too are trading on a negative note.
As we enter the penultimate day of the expiry of current derivative series, we can expect to see the session remaining dominated with rollovers.
The present structure of the market presents two perspectives. First, there has been a sharp lower top and lower bottom on the charts, and this can result into continuing weakness in Wednesdays trade.
Second, Nifty has violated the important support zone, but it remains very much within the filters of those supports. Further, formation of a Doji on the candles and with Nifty remaining almost oversold, we can hope for a technical pullback, even if it remains temporary.
The levels of 10,210 and 10,295 will be immediate resistance for Nifty on Wednesday. Supports existed much lower at 10,080 and 10,010 levels.
The RSI on the daily chart stood at 30.9722 and remained nearly oversold and showed bullish divergence against the price. The daily MACD was bullish and traded below its signal line.
A Doji emerged on the candles. We can still hope for a possible technical pullback, as it has emerged near the support area, while the Nifty was oversold.
All in all, the market hangs in a balance. Given the oversold nature on both daily and weekly charts, we can still hope for a technical rebound.
Wednesdays opening and the trajectory that the market see post opening will be crucial. To avoid further weakness, it would be of importance that Nifty crawls back inside the 10,180-10,250 support zone.
We recommend strictly staying away from shorts and adopt highly cautious view on the market.
STOCKS TO WATCH: Shorts positions were seen being added in stocks of IDFC, IDFC Bank, State Bank of India, ICICI Bank, ITC, PNB, DISH TV, ONGC, Adani Power, Ashok Leyland, Wipro, Infosys, Reliance, Vedanta and Sun Pharma.
(Milan Vaishnav, CMT, MSTA is Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at [email protected])