Gemstone Equity Research & Advisory Services

Friday Trade Setup: NIFTY Markets A Temporary Top; These Sectors To Relatively Outperform

The nearly unabated almost 1200-point move on the markets came to a halt when the Index came off significantly from the high point of the day to end the day with a cut. The markets showed a very resilient opening despite the Asian weakness, and at one point in time also traded positive. While trading in a defined range, and just when it seemed that the markets had averted a potential weakness, it came under very sharp profit taking. NIFTY came off nearly 220-odd point from the high point and ended with a net loss of 166. Points (-1.29%) following a very modest recover.

The profit taking on Thursday was much overdue and was absolutely on anticipated lines. The volatility also rose in the process as the INDIAVIX climbed by 2.35% to 19.5700. Also, it important to note that given the intensity of the corrective move, volatility has not spiked. This shows that there was a consensus, and the move was fairly anticipated, and there was no fear with regard to the move. In the process, the 12963 has become a temporary top for the markets unless taken out.

Friday is likely to see a soft start to the day. The levels of 12825 and 12880 will act as resistance points. The supports will come in much lower at 12700 and 12565.

The RSI on the daily chart is 69.50; it has slipped below 70 from the overbought area and this is bearish. The daily MACD continues to remain bullish as it stays above the signal line.

A candle with a long lower shadow occurred. This happening near a potential resistance area reinforces the resistance of 12960-13000 zone as a strong resistance area for the markets.

As we go ahead in the session tomorrow, the high beta stocks like financials, auto and auto ancillary, etc which had run up much higher and much ahead of the curve will continue to see profit taking pressure. In the previous session, what stood out was the relative outperformance of the traditionally defensive stocks like FMCG, Consumption, Pharma, etc. These stocks will see outright relative outperformance going ahead. We recommend approaching the markets with this thing in mind with a cautious approach going ahead from here. 

Milan Vaishnav, CMT, MSTA
Consulting Technical   Analyst
Member: (CMT Association, USA | CSTA, Canada | STA, UK)  | (Research  Analyst, SEBI Reg. No. INH000003341)

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