While trading perfectly on the analyzed lines, the markets did both the things that it was expected to do. It did open with a gap down; but also, it opened near its support and demonstrated strong resilience to the global weakness. After opening on a negative note, the NIFTY soon crawled higher to recover from its opening low point. The remainder of the session was spent wherein the NIFTY oscillated in a defined sideways trajectory while not showing any incremental weakness. The headline index ended with a net loss of 118.35 points (-0.71%).
The metals continued to drag given the surge of strength in the US Dollar Index. The level of 16380-16400 which is the most immediate support area for the Index needs to be defended in order to avoid any incremental weakness from creeping into the markets. The fabric of the markets will likely turn and stay defensive and the broader markets may continue to relatively underperform the NIFTY. The volatility shot up on the expected lines; INDIAVIX rose 8.60% to 14.0150.
The recovery that we witnessed post the gap-down opening is likely to extend on Monday as well. The markets are likely to open on a positive note; the intraday trajectory that the NIFTY forms after the opening will be crucial to watch. The levels 16495 and 16595 will act as resistance points. The supports will come in at 16380 and 16310 levels.
The Relative Strength Index (RSI) on the daily chart is 65.36, it stays neutral and does not show any divergence against the price. Daily MACD is bullish and above its signal line. A white body occurred on the candles.
The pattern analysis shows that the NIFTY has taken temporary support at the upper edge of the interim consolidation zone that it had created after the surge following a breakout. The zone of 16375-16400 will continue to provide temporary support for the Index in the immediate near term.
All in all, we recommend approaching the markets in the way we have been doing over the past couple of days. The high beta stocks like metals, etc., who have run up too had should be avoided, though aggressive shorts are not advised as well. Instead, it would be prudent to keep focusing on the defensive large-caps and on the stocks that have relatively underperformed the markets. Overall, a cautiously positive approach 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)
