What’s up ahead: Nifty in mood for some consolidation; remain cautious
By Milan Vaishnav, CMT
The domestic equity market did everything that it could do in Thursday’s session. Following a strong global equity setup, the benchmark Nifty50 opened higher and advanced towards the 9,000 mark anf formed an intraday high of 8,992.
However, as we had mentioned categorically in our Thursday’s note, the index later witnessed a volatile and sharp correction and lost over 100 points from the high point of the day to end with a net loss of 46.05 points or 0.51 per cent.
As it was very much expected, the Nifty50 has confirmed the double top resistance zone at 8,930-8,950 levels and for the immediate short term. The index has marked these levels as intermediate top.
On Friday, we expect a subdued start to the market and might continue more consolidation in rangebound trade with a downward bias. However, the buy-on-dips structure of the market has not been altered.
For today, the 8,940 and 8,990 levels shall act as immediate resistance. Supports will come in at 8,835 and 8,780 levels.
The Relative Strength Index or RSI on the daily charts stood at 64.6622 and it has just moved below to from a topping formation. Apart from this, it remains neutral, showing no bullish or bearish divergence or any failure swings. The daily MACD stays bearish as it trades below its signal line. On the candlestick chart, a bearish engulfing line has emerged.
If read in the present context, this has occurred after a significant upward move and, therefore, it has marked an intermediate top. This requires confirmation, but the present candle is long enough to at least halt the present upward move.
The Nifty March futures have shed over 3.36 lakh shares or 1.50 per cent in Open Interest. This shows some minor profit taking from higher levels, but this figure is not large enough to signal any notable shift in the sentiment of the market participants.
A look at pattern analysis shows Nifty has, as of now, confirmed the double top resistance zone of 8,930-8,950 and marked these levels as an intermediate top. For a sustainable bounce, the index will have to move past these levels. Until this happens, we will continue to see the index trapped in corrective activities and rangebound consolidation.
We advise trader to refrain from attempting to short the market as corrective activities tend to remain shallow in a strong market. However, with an intermediate top being marked, aggressive exposures should be avoided and cash levels should be kept higher than normal. One can continue to utilise dips to make selective purchases but sectoral rotation needs to be monitored closely. A cautious view on the markets 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 did everything that it could do in Thursday’s session. Following a strong global equity setup, the benchmark Nifty50 opened higher and advanced towards the 9,000 mark anf formed an intraday high of 8,992.
However, as we had mentioned categorically in our Thursday’s note, the index later witnessed a volatile and sharp correction and lost over 100 points from the high point of the day to end with a net loss of 46.05 points or 0.51 per cent.
As it was very much expected, the Nifty50 has confirmed the double top resistance zone at 8,930-8,950 levels and for the immediate short term. The index has marked these levels as intermediate top.
On Friday, we expect a subdued start to the market and might continue more consolidation in rangebound trade with a downward bias. However, the buy-on-dips structure of the market has not been altered.
For today, the 8,940 and 8,990 levels shall act as immediate resistance. Supports will come in at 8,835 and 8,780 levels.
The Relative Strength Index or RSI on the daily charts stood at 64.6622 and it has just moved below to from a topping formation. Apart from this, it remains neutral, showing no bullish or bearish divergence or any failure swings. The daily MACD stays bearish as it trades below its signal line. On the candlestick chart, a bearish engulfing line has emerged.
If read in the present context, this has occurred after a significant upward move and, therefore, it has marked an intermediate top. This requires confirmation, but the present candle is long enough to at least halt the present upward move.
The Nifty March futures have shed over 3.36 lakh shares or 1.50 per cent in Open Interest. This shows some minor profit taking from higher levels, but this figure is not large enough to signal any notable shift in the sentiment of the market participants.
A look at pattern analysis shows Nifty has, as of now, confirmed the double top resistance zone of 8,930-8,950 and marked these levels as an intermediate top. For a sustainable bounce, the index will have to move past these levels. Until this happens, we will continue to see the index trapped in corrective activities and rangebound consolidation.
We advise trader to refrain from attempting to short the market as corrective activities tend to remain shallow in a strong market. However, with an intermediate top being marked, aggressive exposures should be avoided and cash levels should be kept higher than normal. One can continue to utilise dips to make selective purchases but sectoral rotation needs to be monitored closely. A cautious view on the markets 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)
