Consolidation continued in the Indian equity markets as the NIFTY went near the upper edge of the range and retraced from there to end the day with a modest gain. The markets opened on a mildly positive note. In the early minutes of the trade, the NIFTY slipped in the negative to mark the low point of the day. The index recovered after that to crawl back in the positive. It gained some strength as the day progressed. However, the last hour and a half saw the markets paring their gains. The headline index finally ended the day with a modest gain of 32 points (+0.20%).
It is important to note that the NIFTY is yet to move past the crucial 15900-15950 zone. Not only the markets did not penetrate this zone, but they also retraced after testing the upper edge of the consolidation range. Going by basic classical pattern analysis, it will be a simple conclusion that the breakout has not yet taken place; it will take place only after the Index moves past the 15950 levels convincingly. Also, important to note is that this breakout is something that should not be taken for granted. Confirmation should be awaited; for this to happen, a convincing move above the 15900-15950 area would be important.
Monday is likely to see a quiet start to the day. The levels of 15900 and 15965 will act as resistance points. The supports come in at 15780 and 15710 levels.
The Relative Strength Index (RSI) is 55.90; it remains neutral and does not show any divergence against the price. Though it remains neutral on a 14-day period, if we subject it to a pattern analysis over a longer period, it appears to be marking lower tops which is not a good sign. The daily MACD is bearish and remains below the signal line.
A Doji occurred on the candles. Doji emerging near the resistance point is a sign of impending weakness; however, it will require confirmation on the next trading day. In any case, unless a clean breakout is achieved, such patterns hold the potential to stall the current up move.
Overall, in broader terms, the markets are still under consolidation. The NIFTY has formed a sideways consolidation zone with the 50-DMA levels acting as a lower edge as a support; the upper zone of 15900-15950 is acting as a resistance. Unless this zone is violated or breached on either side, the markets will not display any definite directional bias and continue to trade in this broadly defined range. We recommend avoiding aggressive positions on either side and also suggest continuing to approach the markets on a cautious and selective note.
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)
