Corrective action continued on the Indian markets; after taking a day’s breather, the NIFTY continued to correct for the third day in a row. The NIFTY opened lower, but it recovered over 200-points from the low point formed in the morning to trade in the green by late morning trade. That was the high point that the markets formed; the Index started to drift again in the negative territory. In fact, by late afternoon, NIFTY pared all of its recoveries and went on to form a fresh low point for the day. No significant recovery was seen; the headline Index ended with a net loss of 185.60 points (-1.04%).
NIFTY has shown corrective retracements in eight out of nine trading sessions; it has shaved off over 1000-points from its high point of 18600. The markets also went near to its first important and major support on a closing basis that of the 50-DMA which presently stands at 17565. In the event of any continued down move, this point is expected to act as crucial support on a closing basis. The F&O data shows the addition of fresh shorts as indicated by NIFTY November futures; they have added over 3.31 lakh shares or 3.18% in Net Open Interest.
INDIAVIX declined by 2.72%. Monday is expected to see a stable start; NIFTY has a possibility of staging a technical pullback. The levels of 17750 and 17825 will act as resistance points. The supports will come in at 17600 and 17560 levels.
The Relative Strength Index (RSI) stands at 42.92. It has made a fresh 14-period low but it remains neutral and does not show any divergence against the price. The daily MACD stays bearish and trades below the signal line.
The pattern analysis shows that following a formation of a strong bearish engulfing pattern at the high point, NIFTY created an intermediate top near 18600. The Index has then shown a rapid corrective retracement and has seen levels very near to the 50-DMA which presently stands at 17565. This level is expected to act as support during the present corrective move on a closing basis.
There are higher possibilities of the markets in general staging a technical pullback. NIFTY PCR across all expiries stands at 0.75 which is near to the oversold zone. Few sectors like Oil and Gas, PSE, select Auto and Banks, and Pharma have shown resilience; these pockets are likely to show relative outperformance in this truncated week. We recommend sticking with those stocks that have shown improving Relative Strength while keeping the overall 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)
