Price action in 16700-17000 zone will indicate future trend
In fact, the volume is lesser than Monday, and the Open Interest also declined on a 156 pts gain day
image for illustrative purpose
The benchmark indices closed positively with the short covering. The Nifty closed with 156.85 points again at 16770.85. All the sector indices ended in the green zone. The Metal and Media indices are up by over 2.5 per cent each. Nifty IT index is up by 1.98 per cent, and Realty and Infra indices advanced by 1.5 per cent. The PSU Bank index closed just flat. The India VIX is down by 7.53 per cent. The market breadth is positive as 1450 advances and 590 declines. About 59 stocks hit fresh a 52-week high, and 148 stocks traded in the upper circuit.
On another day of high volatility, the Nifty ended in positive territory. As we expected, the index has retraced 38.2 per cent towards 16880 and declined below the opening level. Tuesday's price action is not convincingly positive though it closed with a decent gain. It has formed a Doji candle, with a long upper shadow, which shows the profit booking at higher levels.
In fact, the volume is lesser than Monday, and the Open Interest also declined on a 156 points gain day. Before the weekly expiry, there was an unwinding of the positions witnessed. The decline in the last hour has indicated that the bounce may not sustain unless it crosses 17025-170 zone. Tuesday's low of 16688 will act as key support. As suspected on Monday, the stochastic oscillator has given a buy signal in the extreme oversold zone. No divergences were seen in any timeframe. The price action between the 16700-17000 zone will indicate future trend. Any consolidation below 17170 will be just a resting period before it resumes the downtrend.
(The author is financial journalist, technical analyst, family fund manager)
