After three days of strong technical pullback, the markets spent their second day consolidating with inherently positive bias. On the last trading day of the week, the markets opened on a modestly negative note but soon crawled into the positive territory for a brief moment. Selling pressure crept in; that took the NIFTY go very near to the 17400-levels. However, the afternoon trade saw the markets stage a remarkable recovery from its low point. Although ranged, NIFTY recouped over 110-points from the low point of the day. It finally ended just flat and ended the day with a negligible loss of 5.55 points (-0.03%).
Despite ending on a flat note, the NIFTY has gone to display a buoyant undercurrent. The NIFTY recouped from its lows and ended flat; the current month NIFTY futures have shed over 2.58 lakh shares or 2.28% in net Open Interest. This shows that the surge from the lower levels was fueled by heavy short covering. The volatility also declined as INDIAVIX came off by 3.27% to 16.0600. With the NIFTY now above 20-DMA of 17458, it would be important for the Index to keep its head above this point to avoid slipping into consolidation. The 100-DMA, which presently stands at 17245, remains a very important support on a closing basis.
Monday is likely to see a positive start to the day; the levels of 17550 and 17630 are likely to act as immediate resistance points. The supports come in at 17430 and 17380 levels.
The Relative Strength Index (RSI) on the daily chart is 50.22; it remains neutral and does not show any divergence against the price. The daily MACD is bullish and above the signal line. Apart from a Spinning Top that occurred, no other formations were seen on the charts.
The pattern analysis shows that despite a momentary violation of the 100-DMA on a closing basis, the markets have been able to largely defend that point; this 100-DMA continues to stay as a major support in the immediate near term. From a very short-term perspective, the 20-DMA remains to be watched as any violation may push the index in some more consolidation again.
All in all, the markets are likely to stay in a broad range with limited possibilities of any major down move. Some chances of consolidation cannot be ruled out before it moves higher but the underlying currents seem buoyant as of now. It is recommended that creating shorts must be avoided. Instead, all down moves must be used to enter defensive and relatively stronger stocks which are likely to relatively outperform the broader markets.
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)
