The last hour of trade saw some selling pressure from key technical resistance levels as Nifty gave up gains from there for the second time in the day. The headline index ended with a net gain of 66.80 points, or 0.65 per cent.
As signs of tiredness emerged, the market again highlighted the importance of some key technical levels that exist on the long-term weekly charts. In Monday’s session, Nifty faced strong resistance from levels close to the 200-week moving average, which currently stands at 10,376. Monday’s high of 10,393 and the 200-DMA will continue to offer resistance to the index throughout the week.
Volatility index INDIA VIX moved 1.65 per cent higher to 30.4600 as volatility increased marginally.
On Tuesday, Nifty is likely to see a tepid start. The 10,355 and 10,395 levels are expected to offer strong resistance, while the supports will come in lower at 10,245 and 10,190 levels.
The Relative Strength Index (RSI) stood at 65.66. It remains neutral and does not show any divergence against price. The daily MACD remains bullish as it trades above the signal line. A Doji appeared on the candles. The appearance of a Doji near the pattern resistance coincided with a critically important resistance point on the higher timeframe charts, which made the candle more potent and important.
Pattern analysis showed Nifty remains in an upward rising channel. However, as it traded above two of the three key moving averages, the index formed a potential reversal candle of a Doji as mentioned above. There are strong chances that Nifty may halt its up-move at current level and would not move significantly higher unless the high of 10,393 is taken out convincingly.
With the current risk-on setup still in the play, we do not rule out the possibility of some intermittent up-moves taking place. However, in all probability with Nifty facing resistance at a key resistance point on a weekly chart, the market is likely to take a breather at current level. Going ahead, despite some intermittent up-move, the market may cool down a bit until and unless the 10,375-10,395 zone is taken out with force. We recommend avoiding any major long position and cautious approach to the market at this stage.
(Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founder of Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at [email protected])