Bulls witness smart recovery from lower levels; market trades near days high

Market Update at 10:35 AM: Indian markets have recovered smartly from the lower levels. Nifty is trading near the day’s high i.e., above the 14,500 mark. It has recovered almost 170 points from the lower levels as well as from February 02 gap area support. The top three contributors to Nifty 50 index are ITC, Kotak Mahindra Bank, and Hindustan Unilever.   

Cues from options data indicate that it would be difficult for the bulls to sustain above the 14,500 mark as heavy call writing is seen at this level since more than 11.8 lakh open interest has been added at this call strike. Meanwhile, the level of 14,400 is likely to act as immediate support as more than 10 lakh open interest has been added in the 14,400-put strike today itself.

Following US Federal Reserve Chairman Jerome Powell comments and subsequently plunges in the dollar index ignited risk-on mode and as a result of this, the Indian markets witnessed a cheerful opening.  

Despite a gap-up opening, Nifty did not manage to cross its 20-DMA and after paring its early gains, it traded in a range. And just when the market participants assumed that things have started settling down, a sharp fall in the index appeared out of the blue and D-Street turned into a chaotic mode amid a spike in the US bond yields. In the second half of the trading session, Nifty index breached its important psychological level of 14,500 and tested lows of 14,478. However, it recovered from low levels to finally end the day with a loss of 1.11 per cent.   

On Wednesday, the price of action of the day formed a bear candle, carrying lower higher and lower low, indicating extended correction. This was the fifth successive bearish candle formed on the daily chart and in all these five trading sessions, the index has seen a gap-up opening. However, the index has not been able to move much above the opening levels.  

On March 12, the index opened at 15,321 and registered a high of 15,336 while on March 15, the open was equal to the high and on March 16, the open was 14,996, and the high of the day was 15,051.60. So, the index moved up by about 55 points after opening. On March 17, the index moved only 10 points higher from the opening level and on March 18, the difference between open and high was a mere 20 points. So, after analysing each of the mentioned trading sessions, it clearly reflects that there is a lack of bullish strength. The difference between high and open levels indicates the strength of the bull. While on the other hand, the difference between open and low of the day indicates the strength of bears, and each day, we have noticed that bears are clearly dominating. 

Nifty is now trading below its 20 and 50-DMA. Further, the index has recorded a distribution day on Wednesday as the volume was higher compared to the previous session and now, the distribution count stands at six. Besides, since the index is trading below its 20 and 50-DMA, the market status is categorised as an uptrend under pressure.   

Going ahead, the zone of 14,336-14,469 is likely to act as an important zone in the near term as this is a gap area of February 2 and recently, we have seen that the index had bounced back from this zone. Hence, a pullback from these levels would not be ruled. Further, the RSI has reached the 40-mark, which usually acts as a support level. Hence, as long as the zone of 14,336-14,469 is protected, hope for a bounce-back in the index. However, any pullback is not likely to sustain but any bounce back may resist around the 14,900 and 15,000 levels.