The NSE benchmark Nifty on Wednesday settled with a loss of 117.60 points or 1.08 per cent at 10,792.50. Indian stocks remained weak on expected lines amid prevailing bearishness in the global markets.
Thursdays as well as the upcoming sessions have now become important from the technical point of view.
The headline index has retracted once again from the 100-DMA, which is at 10,899, and has taken support at 200-DMA, at 10,784 level.
Nifty is now trapped in a narrow 100-point range, and moving past the 100-DMA is now important, as this moving average has almost become a proxy trend line as evident on the charts.
We may find market attempting to stabilise on Thursday, but sustaining above the 200-DMA at 10,784 will be important for Nifty.
The levels 10,850 and 10,900 will act as immediate resistance area, while supports may come in at 10,730 and 10,660 zones.
The Relative Strength Index (RSI) on the daily charts stood at 51.228, and has it continued to remain neutral while not showing any kind of divergence against the price.
The daily MACD has again turned bearish after reporting a negative crossover and it now trades below its signal line.
On the candles, a big black body emerged. It is for the second time in the past couple of days that a big black body emerged near the 100-DMA. This has once again reinforced the 100-DMA as an important resistance and a supply zone for Nifty.
The index now remains critically placed on the charts. The area of 100-DMA which is presently at 10,899 remains an important resistance followed by 10,950, which will act as a minor double top.
On the downside, Nifty has tested its 200-DMA, which is 10,784. It would be of important for the index to keep its head above 200-DMA mark and consolidate. Any breach of this level will bring in more weakness.
On the other hand, F&O figures suggest creation of fresh shorts in the system, as Wednesdays decline came with a net addition of open interest to the tune of 8.07 lakh shares or 3.46 per cent in Nifty. This suggest that shorts may lend support to the market at lower levels.
For Thursday, we reiterate staying away from creating any major directional call. Shorts should be avoided given the large short positions in the system.
While remaining light on the overall exposures, liquidity should be maintained along with adopting a cautious view on the market.
(Milan Vaishnav, CMT, MSTA is Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at [email protected])
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