The domestic stock market snapped a four-day winning streak on Wednesday despite rebounding in the last hour of the trade. NSE benchmark
opened in the red and slipped below the crucial 12,300 level during the session. After recovering most of the gains in the second half on short covering, the index finally settled with a modest loss of 19 points or 0.15 per cent at 12,343.30.
Nifty setup is suggesting correction or some consolidation in a defined range. Over the past couple of sessions, the index has risen over 225 points, and some corrective moves from here cannot be ruled out.
With weekly expiry of options on Thursday, data suggests that the price action of the headline index against the 12,300 level will be crucial to watch out for.
Thursday’s session is likely to see a soft start with 12,350 and 12,395 levels acting as immediate resistance. Support may come in lower at 12,285 and 12,250.
(RSI) on the daily chart was 60.48 and stayed neutral, showing no divergence against the price. The daily MACD was bullish and it traded above its signal line.
A Hanging Man pattern was formed on the daily chart. This was a near-classic formation of a Hanging Man as the candle had a lower shadow, much longer than the body. It would have been a precise Doji formation, but there was a minor body because of a small difference between the open and the close of Nifty.
The occurrence of such a formation at high levels signals a disruption in the rally, though it will require a confirmation on the next session.
As per pattern analysis, Nifty has halted at the upper trend line of the present broadening formation. The rising nature of this trend line has been preventing a clear breakout.
The 12,300 strike witnessed the maximum Call open interest as well as the highest Put buildup. However, at present, the 12,300 strike has the maximum Put OI, and this makes the price action of Nifty against this level important.
We would advise traders to exercise caution at current levels and recommend not to build excessive exposure.
(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])
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of
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