16980-17383 range for breakout level
As Sept F&O series is ending in next 2 days, the rollovers will play a major role in mkt direction
image for illustrative purpose
After a four-day sharp decline, the benchmark indices tried to consolidate in the range. The positive global market cues also helped NSE Nifty consolidate. The Nifty ended at 17007.40 with just an 8.90 points decline. None of the sector indexes gained or lost more than a per cent. Nifty IT and Pharma indices were the top gainers with 0.98 per cent each. FMCG gained by 0.64 per cent. Media, Infra and PSE indices advanced by just 0.38 per cent. The Metal and Fin Nifty are down by 0.85 per cent. The market breadth is positive as 1027 advances and 847 declines. About 53 stocks hit a new 52-week low, and 94 stocks traded in the lower circuit.
The Nifty closed flat after a volatile trading session. It took support at 200DMA. It tried at least six times to breach the 16990 (200DMA) level on an hourly closing basis. It looks like a strong base for now on a shorter period of time frame. The benchmark index mostly traded in the 16990-17170 zone for the last two days. Only a breakout of this zone will lead to a directional move. As the Nifty has formed a lower low and lower high bar. The 38.2 per cent retracement level (16980) of the prior uptrend also holds strong support for the day. The index has filled the July 29 gap successfully on Tuesday. A decline towards the 50 per cent retracement level will fill the July 28 gap too.
As mentioned earlier, as long as the 16980-90 support holds, the Nifty may consolidate further in the range. If there is any bounce, the gap area of 17196-291 may act as resistance. Now the 50DMA resistance is at 17383. In a broader sense, the 16980-17383 is the range to watch for a breakout. The overall directions on the downside are as per the current price structure. On an hourly chart, there is a positive divergence in RSI, which lead to a bounce. In any case, the Nifty enters into the gap area, and this positive divergence will get a confirmation for its bullish implications. As the September series is ending in the next two days, the rollovers will play a major role in the market direction. Currently, the rollovers are at 35.73, much below the three and six months average.
(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)
