However, the index later made a remarkable comeback and ended the day with a gain of 188.20 points or 1.85 per cent.
For Thursdays session, traders need to keep two things in mind.
First, with Wednesdays pullback, Nifty has averted further weakness, which it was prone to below the 10180 level. The index kept its head above the 10,180-10,250 zones.
Second, it has tested the levels near 10,400, as it posted an intraday high of 10,396.
Even as Nifty recovered nearly 290 points from the days low, it halted its upmove near the 10,400-10,410 zone. These are the important pattern supports that the index has breached on the downside. Now, this zone can pose some resistance.
Thursday is likely to see levels of 10,430 and 10,490 acting as resistance area for Nifty. Supports may come in at 10,300 and 10240 levels.
The RSI on the daily chart stood at 45.5137 and it has marked a fresh 14-period high, which is bullish. It also showed bullish divergence against the price. Daily MACD trended strong, while remaining above its signal line.
If we have a look at the pattern analysis, Nifty first breached the important support in the 10,400-10,410 zone. Thereafter, it further violated the supports that existed in the zone of 10,180-10,250 twice. As of now, it has traded above these levels despite a couple of violations.
Now, for this pullback to sustain, Nifty will have to move past and stay above the 10,400-10,410 zone.
The index has kept its head above the important 10,180-10,250 levels. Now, it will need to move past the 10,410 mark and stay above it to form a base in the current zone.
At present, the temporary base formation was seen, but it awaits confirmation. If this happens, we can expect some stability in the market for at least the immediate short term.
Until the level of 10,410 is breached and Nifty sustains above this, the market will remain vulnerable to volatile selloffs. Cautious but positive outlook is advised for the day.
(Milan Vaishnav, CMT, MSTA is Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at [email protected])