Market outlook: Nifty must move past 200-DMA at 10,166 to avoid fresh breakdown

Despite ending below the 200-DMA in the previous session, Indian market in volatile trade on Tuesday managed to keep itself afloat and avoid any serious breakdown.

The NSE benchmark Nifty saw itself in a capped range during the day, while struggling to keep its head above the crucial 10,040-mark. The market finally ended with a net gain of 30.10 points or 0.30 per cent.

As we approach Wednesday’s session, we can expect technical pullback by the market. A modestly positive start is expected, but in any case Nifty will have to move past the 10,166-mark to stay successfully afloat and avoid any major breakdown. The 10,166 level is the 200-DMA.


Given the oversold nature of the oscillators, even if the Nifty does not immediately find its bottom, there are larger chances of a pullback than an outright breakdown from current levels.

The levels of 10,166 and 10,245 will act as immediate resistance for the market. Crucial supports come in at 10,040 and 9,980 zones.

The Relative Strength Index (RSI) on the daily chart is 36.0100, and it remains neutral showing no divergences against the price. The daily MACD is bearish, while it trades below its signal line. Pattern analysis shows that the Nifty has continued to resist to the 200-DMA on the upside while attempting to pullback. It will have to move past 10166-mark at the to have a sustainable and serious pullback.

Until this happens, Nifty remains vulnerable to volatile oscillations, with 10,040 acting as support. Overall, Nifty is not completely out of the woods as yet, but it certainly remains oversold on some oscillators.

This makes it likely that even if it remains in continuing downtrend, it gives some decent technical pullback. However, the moving past and closing above 10,166 will be crucial for the Nifty to avoid any major breakdown.

We will recommend avoiding any major shorts at this juncture. Cash should be preserved and extremely select stock specific purchases may be made. Continuance of cautious outlook is advised until we see Nifty moving past 10,166 in a convincing manner.

STOCKS TO WATCH: Resilient technical is seen on stocks like Bharti Infratel, Tata Steel, CG Power, Vedanta, Tata Power, Mercator, Zee Entertainment, BEML, Maruti, Bharat Financial and Grasim.

(Milan Vaishnav, CMT, MSTA is Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at milan.vaishnav@equityresearch.asia)