The market is trying hard to find a temporary bottom. The trend for Wednesday will depend on the price action of Nifty against 7,850. If the headline index manages to open or move past this level, it will then enter a broad consolidation zone. If it fails to do so, or struggles near 7,850, it is likely to turn weaker again.
Volatility index or India Vix surged another 16.15 per cent to 83.61, and now trades at its highest levels.
Wednesday’s session is likely to see 7,850 and 7,980 levels act as immediate resistance. Support may come in at 7,665 and 7,500.
The Relative Strength Index (RSI) on the daily chart stood at 22.46 and stayed neutral, showing no divergence against the price. The indicator remained in the oversold zone. The daily MACD was bearish and traded below its signal line. A Doji was formed on the candles. This shows a lack of consensus and indecisiveness among the market participants.
As per pattern analysis, after initially marking a low near 7,850, Nifty violated those levels a couple of days after that. At present, it has just closed a notch below that level. If the index manages to crawl above 7,850, we will see it entering in a broad consolidation zone. The lead indicators remain in the oversold territory.
The market is still witnessing rallies that are just fuelled by short covering. Currently, the market remains devoid of any fresh buying from lower levels. There are possibilities of the market seeing a positive start. However, as it happened over the previous session, the sustainability of such pullbacks will be key. While keeping the analysis on similar lines, we reiterate not to chase pullbacks and wait until a directional bias is firmly established.
(Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founder of Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at email@example.com)