In the previous market note, it was mentioned that NSE Nifty was prone to sharp downsides. On expected lines, Nifty witnessed heavy selling on Monday and ended with a loss of 114 points or 0.97 per cent.

The index is set to approach Tuesday’s trade with a weak technical setup. India VIX spiked 9.99 per cent to 26.43 and hit multi-year high.

The 50-pack index continued to show weakness on its lead indicators, and there are high probabilities of it testing the 11,550 support and even breach it eventually.

Tuesday’s session will see 11,630 and 11,675 levels act as immediate resistance points. The supports may come in at 11,550 and 11,460 levels.

The Relative Strength Index (RSI) on the daily chart stood at 50.3791 and marked a fresh 14-period low, which is bearish. It also showed bearish divergence against the price.

The daily MACD stayed bearish while trading below its signal line. A falling window occurred on the candles. It had a spinning top with a small real body. This signals indecisiveness in the market and potential loss of momentum.

A falling window resulted out of a gap down, and it can have even more bearish implications going ahead.

Given the pattern analysis of the daily chart, the double top at 11,760 has remained intact despite one failed attempt by Nifty to break above it.

We see the session on Tuesday to remain volatile and expect Nifty to trade with bearish undertone. Few attempts of short covering may be seen, but major upside is not expected.

The 11,550 level, which might act as a short-term support will be important to watch out for. Any slip below this level will inflict more weakness in the markets.

A cautious outlook 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 milan.vaishnav@equityresearch.asia)