The index recovered at the end of the afternoon and returned to positive territory. The benchmark index closed with a modest gain of 20.05 points, or 0.12 percent. While there are no distinct signs of a major corrective move, the current technical setup suggests that the range’s consolidation may continue.
The 16,300 level, if removed, could fuel a new rally in Nifty. However, until that happens, this point will continue to offer resistance as high call writing is evident at this level. Volatility remained unchanged; and INDIA VIX remained at the same level, losing only 0.01%. Nifty’s behavior relative to the 16,300 level needs to be watched closely in the short term.
Tuesday’s session should have a quiet start. The market is expected to remain largely resilient and limited. The 16,320 and 16,400 levels will act as key resistance, while supports will be at the 16,200 and 16,130 levels. The Relative Strength Index (RSI) on the daily chart stood at 67.57; it remains neutral and shows no divergence from the price.
The daily MACD is bullish and stays above the signal line. A spinning top has occurred on the candles. Spinners are formed when there is very little difference between the open and close levels. They form a real little body and are the result of a lack of directional consensus among market players. Analysis of the patterns shows that the breakout that occurred after the Nifty exited the 15,900-15,950 area held up well. Instead of correcting, Nifty is consolidating near its peak, showing the internal strength of the market as of now.
Overall, we reiterate to avoid aggressive shorts when approaching such technical setups. All purchases should be limited to defensive stocks and large caps, as the broader market may continue to underperform. Bank Nifty could relatively outperform the overall market and could continue to do so over the next few days.
(Milan Vaishnav, CMT, MSTA, is a consulting technical analyst and founder of EquityResearch.asia and ChartWizard.ae and is based in Vadodara. He can be contacted at [email protected])