One concerning thing surfacing over the past couple of days was that volatility has come down significantly after 27% spike seen a few days back.
On a day dominated with weekly options expiry, the domestic equity market witnessed rangebound trade on the expected lines though it extended losses. Nifty opened on a negative note but soon recovered its morning losses to trade flat near the previous close. However, the recovery did not sustain, and Nifty drifted back into the negative territory. The entire session was spent by the index moving in a defined 100-point range before it closed with a net loss of 71 points, or 0.78 per cent.
One concerning thing surfacing over the past couple of days was that volatility has come down significantly after 27% spike seen a few days back. In the previous session also, volatility index India VIX had come off 3.19 per cent to 39.9300. The persistent lower levels of volatility are paving the way for a fresh decline in the market in the coming days. Also, this will keep upsides, if any, limited to a certain extent.
Friday's session is likely to see a stable start with the 9,245 and 9,315 levels acting as key resistance for Nifty, while supports will come in at 9,105 and 9,050 levels. The Relative Strength Index (RSI) on the daily chart stood at 48.40; it remains neutral and does not show any divergence against price. The daily MACD remains bullish. It looks bullish as it remains above its signal line. However, the slope of the histogram suggests the momentum is decelerating, and the indicator is moving to report a negative crossover in the coming days.
A Spinning Top emerged again on Nifty charts. They arise out of a small real body, indicating a very little difference between the opening and the closing price of the session. They also denote lack of directional consensus and indecisiveness among market participants.
Pattern analysis showed Nifty is hanging precariously outside the Rising Wedge on the lower side, after it had suffered an expected downward breach. In all likelihood, such patterns would result in the resumption of the downtrend even if it results in minor pullbacks.
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Some bit of consolidation and mild technical pullbacks cannot be ruled out from current levels. However, upsides, if any, will be short-lived in nature and limited in extent. We strongly recommend staying away from taking any major directional exposure and protecting profits on either side. A defensive approach is advised for the day.
(Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founder of Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at milan.vaishnav@equityresearch.asia)
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)
