In our previous note, we had expected an imminent technical pullback, though 200-DMA still was likely to act as immediate resistance for the market.
While trading on these expected lines, Indian equities gave a strong pullback, and ended the day with Nifty gaining 132.60 points or 1.33 per cent.
Though the pullback remained technical in nature, it has certainly marked a fierce attempt by the market to reverse its corrective actions.
Going into trade on Tuesday, we still expect the levels of 200-DMA, which stands at 10,175, to act as immediate resistance. This level also is a pattern resistance area. Further, the levels of 10,230 will resist the upmove.
On the lower side, the levels of 10,090 and 10,040 are expected to provide supports.
The Relative Strength Index (RSI) on the daily chart is 40.6887, and it is seen neutral against the price not showing any divergence. RSI is also seen taking a pattern support and inching higher.
The daily MACD still stays bearish while trading below its signal line. A Big White Candle emerged. This emerging near the oversold area and support levels further add to the credibility of its likely effect.
While having a look at pattern analysis, Mondays session remains technically significant. With the market crawling back above the 10,040-mark, it has thwarted a major breach of a 27-month long upward rising channel on the week charts.
Overall, there are high chances that the pullback that we saw gets extended on Tuesday. However, this upmove might get a pause near the 200-DMA, which stand at 10,175. This also is a important pattern resistance area. There are chances that we see the market consolidating a bit around these levels.
We also enter the penultimate day of the expiry, and the rollover activities may keep the market volatile. We advice approaching market with positive caution and utilise corrective moves to make select purchases.
STOCKS TO WATCH: Fresh long positions were seen being added in counters like Suzlon, ITC, Reliance, Vedanta, CG Power, State Bank Of India, Idea, Axis Bank, TV18 Broadcast, DHFL, Hindalco, Ashok Leyland and Equitas.
Milan Vaishnav, CMT, MSTA is Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at [email protected])