Market outlook: Shorts rising, but Nifty likely to consolidate
, ET CONTRIBUTORS|
Updated: Nov 03, 2017, 08.46 AM IST
After a strong session on Wednesday, the domestic equity market consolidated on Thursday as the Nifty50 oscillated in a narrow range before ending the day with a minor loss of 16.70 points, or 0.16 per cent.
That the market consolidated after a sharp rise is no doubt a show of underlying strength. However, the rather uncommon thing that has come up is that on one hand, the Nifty50 has tested and faced resistance at a 19-month-old rising trend line on the weekly charts; and on the other, a sharp rise in open interest along with a decline in the Nifty indicated addition of short positions in the system.
Friday’s would be an interesting session to see if the Nifty50 continues to consolidate or the persistent show of strength results in sharp short covering.
The resistance levels for the Nifty50 have now shifted to 10,453 and 10,565 levels. Supports have shifted lower to 10,360 and 10,290 zones.
The Relative Strength Index or RSI on the daily chart stood at 69.7761. It has just crossed below the overbought area and this is a bearish signal. The daily MACD continued to trade above its signal line. Though no specific formation was observed on the candles, the session once again represented a spinning-top like formation, conveying a great deal of indecisiveness and caution among the participants.
Overall, going into Friday’s session, market breadth continues to be a niggling technical worry and the Nifty50 is likely to face resistance at the 19-month-long upward rising trend line, which is something we cannot ignore. The momentum may remain, and traders generally have no choice but to chase the momentum. One may do so, but still continue to maintain vigil at higher levels and continue to use every bounce more for protecting profits at higher levels.
The market is generally expected to remain highly stock or sector-specific in nature.
STOCKS TO WATCH:
Underlying buoyancy is seen on counters like IDBI Bank, Adani Power, HCL Tech, Shriram Transport, REC, PFC and LIC Housing Finance. These stocks are expected to trade with a positive bias.
(Milan Vaishnav, CMT, MSTA is Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at milan.vaishnav@equityresearch.asia)
That the market consolidated after a sharp rise is no doubt a show of underlying strength. However, the rather uncommon thing that has come up is that on one hand, the Nifty50 has tested and faced resistance at a 19-month-old rising trend line on the weekly charts; and on the other, a sharp rise in open interest along with a decline in the Nifty indicated addition of short positions in the system.
Friday’s would be an interesting session to see if the Nifty50 continues to consolidate or the persistent show of strength results in sharp short covering.
The resistance levels for the Nifty50 have now shifted to 10,453 and 10,565 levels. Supports have shifted lower to 10,360 and 10,290 zones.
The Relative Strength Index or RSI on the daily chart stood at 69.7761. It has just crossed below the overbought area and this is a bearish signal. The daily MACD continued to trade above its signal line. Though no specific formation was observed on the candles, the session once again represented a spinning-top like formation, conveying a great deal of indecisiveness and caution among the participants.
Overall, going into Friday’s session, market breadth continues to be a niggling technical worry and the Nifty50 is likely to face resistance at the 19-month-long upward rising trend line, which is something we cannot ignore. The momentum may remain, and traders generally have no choice but to chase the momentum. One may do so, but still continue to maintain vigil at higher levels and continue to use every bounce more for protecting profits at higher levels.
The market is generally expected to remain highly stock or sector-specific in nature.
STOCKS TO WATCH:
Underlying buoyancy is seen on counters like IDBI Bank, Adani Power, HCL Tech, Shriram Transport, REC, PFC and LIC Housing Finance. These stocks are expected to trade with a positive bias.
(Milan Vaishnav, CMT, MSTA is Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at milan.vaishnav@equityresearch.asia)
