In the previous technical note, it was mentioned that in the absence of any adverse cues from the global markets, there are high probabilities of the markets inching higher. In line with this analysis, the NIFTY saw a strong opening on Friday; it opened higher, grew stronger, and ended the day on a strong note. The markets traded in a sideways range after a strong start while it protected its opening gains. The second half of the session saw the index piling up gains as it continued to mark incremental highs during the day. The gains were mentioned throughout the session and in no point in time did the markets show any tendency to correct. The headline index NIFTY50 ended the day with a net gain of 182.30 points (+1.13%).
The markets are likely to see a stable and positive start to the trading day; the NIFTY has ended near the upper edge of the broad 15700-16400 trading range. The opening of the market and its price behavior against the level of 16400 will be crucial. If the index is able to keep its head above 16400 for long, it may see an extension of the up move as the markets will try and fill the gap that exists between 16500-16650 levels. If this happens, then we can safely presume that the most recent low point near 15700 is the bottom that is put in place by the markets for the near future.
Monday is likely to see the levels of 16400 and 16565 acting as potential resistance points. The supports come in at 16280 and 16210.
The Relative Strength Index (RSI) on the daily chart is 47.95; it stays neutral and does not show any divergence against the price. The daily MACD is bullish and stays below the signal line. A rising window emerged on the candles; it is bullish as it results out of a gap and generally resolves in the direction of the trend.
All in all, the markets are better placed to extend their up-move; however, as per the pattern analysis, this will be possible if the NIFTY is able to move past the 16400 levels and sustain above that. If this happens, we will also see some risk-on approach in the markets and will see some high beta stocks also beginning to do better going ahead.
It is recommended to stay away from trying to short the markets even if they are below the 16400 levels. Even when the markets are within the broad trading range, the dips will continue to get bought. It is further suggested that rather than attempting to short the markets, all consolidation and minor moves on the downsides must be used to make good quality stock purchases. The pockets like Realty, financial stocks, FMCG, PSE, etc., are likely to put up a resilient show in the 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)
