The Indian equity markets stayed in the corrective mood on the last day of the trading week as it ended the day on a negative note. The markets opened lower and stayed in negative territory throughout the day. After opening with a cut, NIFTY continued to stay negative but it did not take any directional bias. The opening low point formed in the first hour of the session was defended throughout the day. While not taking any directional trend, the NIFTY stayed in a 100-point range and oscillated within this area. The headline index finally ended the day with a net loss of 86.10 points (-0.49%).
It is largely expected that the broad trading range formed between 17400-17950 may hold; the markets may try and find stability in the coming week and arrest their corrective move. The F&O data support this technical setup as well. The decline on Friday has come with a rise in Open Interest; NIFTY October series futures have added over 3.66 lakh shares or 3.14% in net Open Interest. This means there is the creation of large short positions which may get covered. In this case, the low point of 17450 becomes a major support area for the markets in the near term; if broken, can result in more weakness.
INDIAVIX came off by 6.48% to 17.2100. Monday may see a positive start to the day; the levels of 17610 and 17665 will act as probable resistance points. The supports come in at 17480 and 17450 levels.
The Relative Strength Index (RSI) on the daily chart is 58.45; it has made a new 14-period low which is bearish. It also continues to show a mild bearish divergence against the price. The daily MACD is bearish and below its signal line.
A falling window emerged on the candles; this essentially forms because of a gap down and usually resolves with the continuation of the downtrend. However, it is extremely important to note that no formation on the candles should be read in isolation. The present falling window has occurred near good pattern support; this may not necessarily result in a continuation of a downtrend.
The analysis for Monday continues to remain on similar lines so far as the technical setup of the market goes. The NIFTY may still continue remaining in a broad range after a possible technical pullback. On the other hand, some stock-specific and sector-specific performances may be seen. We recommend avoiding shorts and making purchases on a highly selective basis while vigilantly protecting the profits a higher levels. The sectors like select banks, autos, PSE, etc., may continue to improve their relative strength as well over the coming days.
This was first published by The Economic Times.
Milan Vaishnav, CMT, MSTA
Consulting Technical Analyst
Member: (CMT Association, USA | CSTA, Canada | STA, UK) | (Research Analyst, SEBI Reg. No. INH000003341)
