Trade setup: Watch out for Nifty’s price action against 17,300 level

The Indian equity market continued to trade precisely on the analysed lines. It tested supports and rebounded from there to end the day with a modest gain.

Nifty saw a positive start to the day; it soon slipped in the negative territory after the initial minutes of the trade. An incremental and intense corrective pressure saw Nifty going near the 17,000-mark as it tested the low of 17,043.65.

A strong recovery was seen, and Nifty recouped all its losses to move back inside the positive territory. The index kept oscillating in a 120-odd-point range. It finally managed to end in the positive while posting a net gain of 53.15 points (+0.31 per cent).


From the technical perspective, Nifty has shown some signs of formation of a potential base. The low point, from where Nifty rebounded is very near to the confluence area of two pattern supports that exist near the 17,000 levels. With Nifty rebounding from these levels, 17,000 continues to remain a crucial support level for the index.

The index options data also suggests continued highest Put OI accumulation at 17,000 levels. This indicates continued existence of this level as an important and immediate support for Nifty.

Volatility came off a bit; India VIX declined by 3.68 per cent to 19.6850. Wednesday is likely to see a stable start to the day.

The levels of 17,300 and 17,410 are likely to act as potential resistance points; the supports come in at 17,150 and 17,100 levels. The trading range is expected to remain a bit wider than usual. The daily RSI stands at 43.59; it is neutral and does not show any divergence against the price.

The daily MACD is bearish and below the signal line. A long-legged Doji is formed on the candles. Any long-legged candle, or the one with a long lower shadow is a sign of a potential formation of a base if it occurs near a support area. The present candle has formed a potential reversal point, of course subject to a confirmation on the next bar.

The weekly options data also show highest Call OI accumulation at 17,500 levels. Theoretically speaking, Nifty has a potential to go up to that level. However, the 17,300 level also saw a significant amount of Call writing taking place.

This means that for the markets to successfully create a base and stage a technical rebound, moving past 17,300 will be crucially important. Nifty’s price action against the level of 17,300 will be crucial to watch. In any case, it is recommended that creating shorts must be avoided. While staying highly selective in making fresh purchases, a cautious outlook is advised for the day.



(Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founder of EquityResearch.asia and ChartWizard.ae (ChartWizard, FZE) and is based at Vadodara. He can be reached at milan.vaishnav@equityresearch.asia)