Nifty knocking on the door of resistance despite slowdown in broader markets

Pritesh Mehta

After galloping from three-digit Gann number of 111(00) to 116(00) in a matter of eight sessions and thereafter recording a high of 11,714, which is marked around the peak of July 17, (i.e. 11,707), the Nifty has hit a wall of resistance.

Back in July 2019, the inability to sustain above three-digit Gann number of 116(00) had led to a sharp corrective move which resulted in a low of 10,637 in August 2019. However, this time around, despite failing to cross above 4-digit Gann number of 1,174(0), Nifty has gone through a phase of time-wise correction, rather than a sharp fall.

This week's action clearly shows Nifty hovering around 11,600, wherein, intraday declines have been short-lived and buying interest has emerged in index biggies and Bank Nifty at lower levels. So, after a strong rally, the benchmark index is consolidating at the top of the trend – a bullish sign.

The market's strength is always gauged through corrections. This week's decline towards a low of 11,491 failed to conjure up any move on the downside so far. On the shorter time frame charts, the midpoint of last week's green tall bar is placed at 11,490. The same coincides with a 180-degree move from the peak of 11,714, which suggests strong supports are at play currently.

Related stories

Pritesh Mehta

Lead Technical Analyst - Institutional Equities|YES Securities

• 
  'Nifty likely to break restraints with banks taking leadership'
• 
  'Keep Nifty & Bank Nifty aside and focus on these 3 sectors showing relative strength'
• 
  Is the phase of Nifty’s outperformance vs bonds coming to an end?

A market that is going through a time-wise corrective phase is bound to provide whipsaw movement. So we should be ready for the days where benchmark indices won't have follow-on moves. So, it is important to identify underperformers and outperformers. When the market gets close to the support zone, we need to ride on the outperformers and sell the underperformers when it struggles to break 11,700.

Despite the recent topsy-turvy ride, the index is still holding above the lower-end of the 5-digit Gann channel and Friday's intraday decline also resulted in a pullback. The possibilities are that the Nifty could begin a process of consolidation between 11,700-11,400 or a retracement back to the second line of defense as per the Gann rule of 8.

As per Gann analysis, Nifty is knocking at the doors of resistance. Currently, it's attempting to surpass multiple Gann supply points (i.e. 11,600 multiple peaks around 11,700).

A decisive move is required to break past the hurdle and confirm a shift in the orbit on the upside.

Despite the slowdown in broader markets, Nifty is yet to show any signs of exhaustion (backed by strength in Bank Nifty) which indicates the strength of the overall structure.

The market base is shifting higher with fresh multiple support points placed around 11,400.

(The author is Lead Technical Analyst - Institutional Equities at Yes Securities.)

Disclaimer: The views and investment tips expressed by investment expert on moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.