Outlook for Wednesday: 50-DMA on Daily Charts crucial as supports expected in close vicinity; Preserving liquidity is advised

Outlook for Wednesday: 50-DMA on Daily Charts crucial as supports expected in close vicinity; Preserving liquidity is advised

The Markets opened subdued and remained range bound the first half of the session. However, last two hours of the trade remained very disappointing as the Rupee fell to its fresh low and it affected the domestic markets as well as they were anyway grappling with no-so-encouraging global cues. The NIFTY saw a sharp decline and went on to test its 50-DMA before ending the day with yet another cut of 150.60 points or 1.32%.

The damage was secular, and all sector indices ended in the red. NIFTY has ended a notch above its 50-DMA and we can expect this level to act as support at Close levels. NIFTY has lost over 300 points in the first two days of the week. We can expect some support to come in at current levels.

Though a sedate start to the trade cannot be ruled out on Wednesday, even if there are minor downsides, the 50-DMA level which stand at 11274 should act as an interim support at Close. The levels of 11325 and 11390 are expected to act as technical resistance to the Markets whereas the levels of 11250 followed by 11210 is expected to lend support.

The Relative Strength Index – RSI on the Weekly Chart is 40.2086. It is bearish as it has marked its fresh 14-period low, but it shows no divergence against its price. Daily MACD stays bearish trading below its signal line.

The pattern analysis shows the Markets classically reverting to its mean after it ran away too ahead of its curve. However, Tuesday’s decline was slightly over-extended in nature.

Overall, as we approach the Markets on Wednesday ahead of the holiday on Thursday, we recommend staying away from taking any directional call in the markets. Shorts should be avoided as there is little tradable gap on the downsides and also because there are still significant number of shorts that exists in the system. On the long side, there are chances of participants turning cautious at higher levels in event of a pullback given a trading holiday in between. We recommend avoiding any kind of directional bets in the Markets until it is seen getting little stabilized. While preserving liquidity to protect existing trading positions, very cautious view is advised for the day.

STOCKS TO WATCH:

Stable technical conditions are observed in stocks like INFOSYS, ANDHRA BANK, RBL, ASIAN PAINTS, ALANKIT, CENTURY PLYBOARDS, CITI UNION BANK, APOLLO HOSPITALS, NITIN FIRE PRODUCTS, CCL PRODUCTS and MOTILAL OSWAL FINANCE.


Milan Vaishnav, CMT, MSTA, Consulting Technical Analyst
Member:
 (MTA, USA / CSTA, Canada / STA, UK)  | (Research Analyst, SEBI Reg. No. INH000003341)
Tel: +91-70164 32277  | www.EquityResearch.asia | milan.vaishnav@equityresearch.asia

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