After the rally following a good set of GDP numbers, the market fizzled out on expected lines. Soon after positive opening, the NSE benchmark Nifty pared its gains and remained rangebound.
The index extended its losses in the last hour and half of the trade, wherein Nifty pared over 150 points from the high point of the day and ended 98.15 points or 0.84 per cent lower.
What market witnessed in Mondays session was long overdue. The overbought and overextended nature had some correction imminent over the past couple of sessions.
The US market is closed for Labor Day and there will be no overnight cues to deal with.
We see a tepid start to the day on Tuesday and expect some stability in the initial trade, but the market is expected to continue to trade with corrective undertone with the levels of 11,760 now acting as immediate top for the market. With levels of 11,650 and 11,760 acting as resistance, supports may come at 11,520 and 11,460 zones.
The Relative Strength Index (RSI) on the daily chart is 60.0479. The RSI marked a fresh 14-period low, which is bearish. A bearish divergence is also observed as the RSI has marked a fresh 14-period low, while the Nifty hasnt.
The daily MACD too has shown a negative crossover and is now bearish trading below its signal line. On the candles, a big engulfing bearish candle has occurred. It remains significant as it has emerged near the resistance area and after an upmove. It can mark a potential top for the market and may temporarily stall the upmove.
Overall, in absence of any overnight global cues and as the technical indicators suggest, we may continue to see the market trading with corrective undertone.
What the market is witnessing is a classical correction after a sharp upmove and this broad consolidation is likely to be extremely healthy for the market.
We recommend remaining extremely light on exposures and avoiding shorts as the primary uptrend remains intact. All downsides should be utilised to make selective purchases. Overall, while remaining light on exposures, cautious approach is advised for the day.
(Milan Vaishnav, CMT, MSTA is Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at email@example.com)