Gemstone Equity Research & Advisory Services

Friday Trade Setup: NIFTY Likely To See A Quiet Start; These Factors Are A Cause Of Concern For Emerging Markets

The Indian equity markets extended its modest correction as it ended yet another day with on a negative note. The Indian markets failed to see a stronger chart despite firm Asian trade setup. It opened positive but marked the intraday high point in the first minutes of the trade. It slowly pared all its opening gains in the morning and slipped in the negative territory. It went to extend its losses as the index marked its intraday low point in the last afternoon trade. Following a mild pullback, the NIFTY ended the day with a net loss of 89.95 points (-0.59%).

The weekly options expiry continued to affect the trend for the day. The markets are now in the broad consolidation zone that was expected; in the process, it has made the high point, i.e., 15431, an intermediate top for the markets. We will not see any substantial sustainable up move unless the NIFTY moves past this point in a convincing manner. So long as this level is not taken out, we will see the markets staying vulnerable to corrective moves and staying within a broad consolidation range.

Friday is likely to see a quiet start to the day. The levels of 15150 and 15225 will act as immediate resistance points; the supports come in at 15000 and 14950 levels.

The Relative Strength Index (RSI) on the daily chart is 63.25; it stays neutral and does not show any divergence against the price. The daily MACD is bullish and trades above its signal line. However, the narrowing slope of the Histogram suggests that a negative crossover of this indicator is likely over the coming days. Apart from a black body that occurred, no other formations were noticed on the charts.

The pattern analysis shows that the NIFTY has not only resisted to its short-term rising trend line resistance, but it has also resisted to the extended trend line resistance. This trend line is drawn from the lows formed in the month of March 2020. While trading above this line, the NIFTY has taken supports on the corrective moves, and while trading below this trend line, it has resisted it so far.

All in all, the markets have made the level of 15431 an intermediate top for the markets. The market breadth has continued to remain a concern and this needs to be watched for over the coming days. There are all chances of the NIFTY staying in a defined range over the coming days, however, the volatility may tend to show some increase in the near term. We reiterate continuing to stay cautious and avoid chasing high beta stocks. The US Dollar Index staying firm with US 10-Yr Yields spiking remains another set of concern for the emerging markets in the near term.

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)

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