What’s up ahead: Nifty may see tepid start; undercurrent remains buoyant
By Milan Vaishnav, CMT
The domestic equity market had a volatile session on Thursday and the benchmark Nifty50 ended with minor gains of 12.60 points, or 0.14 per cent, after witnessing a typically rollover-induced choppiness through the session.
On Monday, the market is likely to see a modestly negative start as it begins the week in the overbought territory near a major area of resistance that has a double top formation. Without disputing the fact that the undercurrent still continues to be buoyant, we see all the possibilities of some sharp correction. The behavior of the markets around the 8,960-9,000 Nifty levels will be of immense importance. For Monday, the 8,975 and 9,005 levels will act as immediate resistance for the market. Supports can come in lower at 8,865 and 8,810 levels.
The Relative Strength Index, or RSI, on the weekly chart stands at 74.9121 and it does not show any failure swings. However, the index has continues to hit fresh 14-period high while the RSI has not. This has resulted in a bearish divergence. Further, the index trades in the overbought territory. The daily MACD is bullish after reporting a positive crossover and it trades above its signal line. No significant formation on the candles was observed.
Pattern analysis clearly shows that the Nifty is approaching one of its major resistance zones. The 8,948-8,950 zone is a major resistance area for the index in form of a double top. Even with the bullish underlying intentions, there are chances that the market will see a temporarily halt to the upward move and again go into consolidation.
Some bouts of profit taking from higher levels and some rangebound consolidation cannot be ruled out. Overall, we expect the Nifty50 to once again face some broad range-bound consolidation. This will keep the sessions relatively more volatile in the coming days. At the same time, we also expect the consolidation and corrections to help the market gather further impetus for a possible upward move.
Given the underlying buoyant structure on the charts, we strongly recommend investors to refrain from creating major short positions. Every corrective dip is likely to offer opportunities for select stock picking. With volatility expected to rule the roost, caution is advised for the day.
(Milan Vaishnav, CMT, is Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at milan.vaishnav@equityresearch.asia)
The domestic equity market had a volatile session on Thursday and the benchmark Nifty50 ended with minor gains of 12.60 points, or 0.14 per cent, after witnessing a typically rollover-induced choppiness through the session.
On Monday, the market is likely to see a modestly negative start as it begins the week in the overbought territory near a major area of resistance that has a double top formation. Without disputing the fact that the undercurrent still continues to be buoyant, we see all the possibilities of some sharp correction. The behavior of the markets around the 8,960-9,000 Nifty levels will be of immense importance. For Monday, the 8,975 and 9,005 levels will act as immediate resistance for the market. Supports can come in lower at 8,865 and 8,810 levels.
The Relative Strength Index, or RSI, on the weekly chart stands at 74.9121 and it does not show any failure swings. However, the index has continues to hit fresh 14-period high while the RSI has not. This has resulted in a bearish divergence. Further, the index trades in the overbought territory. The daily MACD is bullish after reporting a positive crossover and it trades above its signal line. No significant formation on the candles was observed.
Pattern analysis clearly shows that the Nifty is approaching one of its major resistance zones. The 8,948-8,950 zone is a major resistance area for the index in form of a double top. Even with the bullish underlying intentions, there are chances that the market will see a temporarily halt to the upward move and again go into consolidation.
Some bouts of profit taking from higher levels and some rangebound consolidation cannot be ruled out. Overall, we expect the Nifty50 to once again face some broad range-bound consolidation. This will keep the sessions relatively more volatile in the coming days. At the same time, we also expect the consolidation and corrections to help the market gather further impetus for a possible upward move.
Given the underlying buoyant structure on the charts, we strongly recommend investors to refrain from creating major short positions. Every corrective dip is likely to offer opportunities for select stock picking. With volatility expected to rule the roost, caution is advised for the day.
(Milan Vaishnav, CMT, is Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at milan.vaishnav@equityresearch.asia)
