Nifty opened Wednesdays session with global weakness weighing heavy on it. But the benchmark Index, which was at one point down over 120 points, stabilised as the day progressed and a sharp recovery followed, which lifted the index over 170 points from the days low point.
The index ended the day, gaining 66.35 points or 0.62 per cent.
The Indian market is presently placed on a tricky turf. Despite a sharp pullback, the rally halted exactly at a falling trend line as evident on the chart. This level coincides with the 200-DMA, which is currently placed at 10,769 and remains in close vicinity of this pattern resistance.
If there is no more global weakness, Nifty is likely to see a stable start to Thursdays trade, when the market will be dealing with the expiry of the ongoing derivative series. We expect the session to remain volatile with rollovers dominating the proceedings. The price action against the 200-DMA level will remain critical to watch out for in the next session with the 10,770 and 10,840 levels acting as resistance and 10,680 and 10,610 levels acting as immediate supports.
The Relative Strength Index or RSI on the daily chart stood at 49.7363; it remains neutral and shows no divergence against price. The daily MACD remains bearish as it trades below its signal line. A white body appeared on the candle. This formation near the 50-DMA lends some weight to the 50-DMA as the potential support going ahead.
Pattern analysis showed Nifty pulled back sharply from a level near the 50-DMA, which is currently at 10,588. The low of 10,534 also coincided with the trend line support, which Nifty took out on the upside. While pulling pack, the index halted at the falling trend line, which begins from the high of 11,760 and joins the subsequent lower tops.
All in all, Nifty is seen forming an immediate short-term potential bottom near the lows of the previous trading session in the 10,540-10,590 zone. On the upside, the market must deal with the two important resistance spots in the form of a falling trend line pattern resistance and the 200-DMA, which lie in close vicinity at 10,769. If these levels are taken out, we can expect some more strength in the coming days. Until this happens, we will see the index oscillate in a capped range even as it remains vulnerable to bouts of profit taking at higher levels.
(Milan Vaishnav, CMT, MSTA is Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at [email protected])