On Wednesday, we can expect a mildly negative start to the markets and the levels of 50-DMA and the pattern resistance of the falling channel will continue to pose resistance to the Nifty today and in coming sessions as well.
Markets headed nowhere on Tuesday and while remaining in a capped range, the Nifty ended the day with minor losses while resisting precisely to the upper trend line of the falling channel drawn from 8968 levels. On Wednesday as well, we can expect a mildly negative start to the markets and the levels of 50-DMA and the pattern resistance of the falling channel will continue to pose resistance to the Nifty today and in coming sessions as well. Further, we enter the penultimate day of the expiry of the current series and we will continue to see the markets in general remaining dominated with rollover centric activities.
For Wednesday, the levels of 8,710 and 8,745 will continue to act as immediate resistance levels. The supports will come in at 8,650 and 8,620 levels. The RSI—Relative Strength Index on the Daily Chart is 50.0686 and it remains neutral as it shows no bullish or bearish divergence or any failure swing. The Daily MACD is bullish as it trade above its signal line.
On the derivatives front, the Nifty October series shed over 25.69 lakh shares or 15.48 per cent in Open Interest. The November series added over 34.43 lakhs shares or 64.07 per cent in OI resulting into net addition in the Open Interest. While having a look at pattern analysis, the Nifty has been resisting to the 50-DMA which is 8710 and also to the trend line drawn from 8968 levels. There is a falling channel that has appeared and Nifty has been resisting to the falling trend line drawn from the 8968 levels.
The 50-DMA now also coincides with this pattern resistance and therefore the levels of 8710-8720 will continue to pose resistance at close levels as well. Until the Nifty moves past 8750, there won’t be any resumption of up move visible in the markets.
Overall, there has been lack of conviction seen in the participants and the Nifty has not be able to move past its critical resistance zones. Until this happens, we will continue to see Nifty trading in a range and heading nowhere. Volatility will remain ingrained in the markets and we continue to reiterate to protect profits at higher levels as all upsides will remain vulnerable to intermittent selling bouts.
(The author is Consultant Technical Analyst at Gemstone Equity Research & Advisory Services)