Barring for the last hour pullback, the Indian equity markets remained under significant corrective pressure for the third day as it still ended the day with a cut. The markets opened on a negative note once again and remained under secular decline throughout the session. Showing no signs of recovery whatsoever, the NIFTY continued to decline as it marked gradual lows. The NIFTY went on to test the 100-DMA; once this level was tested, the index saw a small technical pullback in the last hour of the trade. The headline index finally ended with a net loss of 181.40 points (-1.01%).
The important highlight of Thursday’s session was the NIFTY testing the 100-DMA levels and bouncing off from there. The 100-DMA, which presently stands at 17633 is the most important level to watch in the immediate short term. This level is expected to continue to hold strong support on a closing basis. This also formed a lower edge/boundary of the broad consolidation that the markets have slipped into. The present moves define the broad consolidation range at 17600-18300 so long as 100-DMA stays defended and protected.
Friday may see markets attempting to find some base for themselves. The levels of 17800 and 17890 acted as resistance points. The supports come in at 17700 and 17610 levels.
The Relative Strength Index (RSI) stands at 50.49; it has marked a new 14-period low which is bearish. However, it stays neutral and does not show any divergence against the price. The daily MACD is bullish and above the signal line; however, the slope of the Histogram suggests that a negative crossover may be seen over the coming days.
The pattern analysis suggests the creation of a broad trading range between 18300-17600; the level of 100-DMA continues to remain the most important level to watch. This point is expected to act as a strong support level for the markets on a closing basis over the near term.
The banking and financial stocks saw strong relative outperformance; this is likely to continue over the coming days. Along with this, it is also expected that the broader markets will also continue to do well on relative terms. It is recommended that shorts should be avoided; all opportunities must be utilized to make select purchases. While still continuing to keep exposures at modest levels, a cautiously positive outlook is advised for the day.
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)
