Some stability expected on Thursday; 200-DMA crucial level to watch

Some stability expected on Thursday; 200-DMA crucial level to watch

Following overnight weakness in the US Markets and subsequent weak Asian peers, the Indian equities too suffered a setback as it opened lower and ended with losses. After opening on a negative note, the NIFTY spent bulk of the time moving in a defined range. Despite minor intermittent recoveries, no major up move was seen. On the downside, the NIFTY drifted towards the 200-DMA and took some support there. At the end, the benchmark Index ended the day losing 86.60 points (-0.80).

The Markets also reacted to the RBI’s policy review in the last hour of the trade. While continuing with the stance of calibrated tightening, the RBI kept rates unchanged while deciding to cut the SLR by 25 bps every quarter beginning January 2019. Markets gave a mixed reaction to RBI policy which largely remained a non-event. After initial hiccups and some weakening later, NIFTY took support at its 200-DMA which is presently at 10749 and recovered from there.

Thursday is likely to witness some stability returning in the trade. We expect the support of 200-DMA to hold and expect the NIFTY to consolidate at current levels. The levels of 10840 and 10865 will act as resistance levels while supports come in at 10745 and 10680 zones.

The RSI on the Daily Chart is 56.1236 and it stays neutral showing no divergences against the price. Daily MACD remain bullish as it trades below its signal line.

If we have look at pattern analysis, the NIFTY has suffered a throwback after moving past 200-DMA couple of days back. After breaching the 200-DMA on the upside, the NIFTY halted its pullback at the 100-DMA and retraced from there. Theoretically, 200-DMA is expected to hold as support in the immediate near term.

US Markets are not trading on Wednesday to honor past president George H. W. Bush who passed late Friday at the age of 94. Given this, we will not have any negative news flow to deal with in the morning. This is likely to help stabilize the Markets. Importantly the Wednesday’s rise has also come with net addition in OI. This shows that shorts have continued to pile up and are expected to lend support at lower levels. While continuing to adopt a cautious view, we recommend making select purchases in modest quantities with each lower level that the Markets offer.

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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