In an extremely bearish session on Wednesday, NSE Nifty ended below the previous low of 8,555, which it had formed a couple of days back.
The domestic stock market made a stable opening, however, the index soon pared all its gains.
After establishing a firm downtrend, the 50-stock pack came off over 500 points from the days high to end with a deep cut of 498.25 points or 5.56 per cent at 8,468.80.If we read the present technical setup in isolation, a probability of a mild technical pullback cannot be ruled out.
However, analysing the domestic situation in isolation and preempting a rebound will not help.
The market will continue to remain affected by global weakness.
An overnight weakness in the US stocks will weigh on Indian markets too.The volatility index, or India Vix, rose marginally by 1.64 per cent to the 63.96 level.On Thursdays session, the 8,510 and 8,635 levels will act as resistance, while support may come in much lower at 8,310 and 8,235.
Just like in the past couple of sessions, the days range will continue to remain wider than usual.The Relative Strength Index (RSI) on the daily chart was at 15.15 and it continued to remain deeply oversold.
The indicator showed a bullish divergence, as it did not make a fresh 14-period low in line with Nifty.
The daily MACD stayed deeply bearish, while trading below and much away from the signal line.Again, the technical indicators on the charts are deeply oversold.However, it would be dangerous to attempt to find a bottom without keeping the global markets scenario in perspective.We would recommend trading on either side with great caution.
There are chances of some technical pullback, but again, the sustainability of such rebounds will be a big question mark.
We recommend continuing to approach the market with utmost caution.
Bargain buying should be attempted after at least a couple of faint signals of potential bottoms are in place.(Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founder of Gemstone Equity Research - Advisory Services, Vadodara.
He can be reached at milan.vaishnav@equityresearch.asia)