Domestic stocks opened stronger on Wednesday as the benchmark Nifty attempted to move higher. However, the index lost ground from higher levels and chose to consolidate with minor losses at the end of the day.
Nifty opened on a higher note and the opening minutes of trading marked the high point of the day. It gave up gains gradually and slipped into negative territory by noon. While it made its low in afternoon trade, Nifty still kept its losses marginal. The headline index finally ended marginally lower at 69.85 points (-0.41%).
Nifty is descending from higher levels. More importantly, a stay below the 100-DMA of the index further reinforces this point as a major resistance point. With the 100-DMA at 17,351, there will be no sustainable upside in Nifty unless these levels are pulled out solidly.
We also have weekly options expiration coming up. Options data suggest maximum call OI at 17,500 level followed by 17,300 level. The options data helps us to objectively conclude that unless the area of 17,350-17,500 is taken solidly, there are more chances of markets facing corrective pressure at higher levels.
The 17,300 and 17,365 levels are likely to be seen as resistance points on Thursday. Support comes at the 17,200 and 17,030 levels.
The Relative Strength Index (RSI) on the daily chart is 55.67. It remains neutral and shows no divergence towards the price.
The daily MACD is bullish and above the signal line. Dark clouds covered the candles. Apart from this no other formation is seen.
Pattern analysis shows that Nifty has opposed the 100-DMA which is at 17,351, it is one notch above the 50-DMA which is at 17,225.
If this level is also breached, we can see that the market finds itself under pressure with each future technical shortfall.
Overall, even if the market attempts to make some moves upwards again, all such moves should be used to protect profits rather than make fresh purchases.
All new purchases should be placed in a highly stock-specific nature and aggressive buying should be avoided. Unless Nifty observes a directional move above 17,500 or below 17,000, this 500-point range remains a consolidation zone for the index.
In the absence of any directional bias, a highly stock-specific and selective approach for the day is advised.
(Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and Founder of Equity Research.Asia and Chartwizard.AE (Chartwizard, FZE) and based in Vadodara. He can be contacted at firstname.lastname@example.org)
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