Markets May Extend Its Corrective Moves On Thursday; Up-sides, If Any Are Likely To Remain Limited
Markets witnessed long unwinding and underwent some classical correction which was somewhat long overdue. After witnessing a flat and quiet start, the index traded in a capped range while moving in a sideways trajectory. The markets took no directional bias in the first half of the trade. However, the second half of the trade saw sharp profit taking from higher levels. The NIFTY pared over 110-points from the high point of the day before settling with a loss of 87.65 points (-0.75%).
We expect a flat to negative start to the day on Thursday. The session may remain somewhat volatile due to weekly index options expiry. However, as compared to past several days, we expect volatility to come down a bit and also expect VIX to get little quiet even if the market extends its corrective moves.
Thursday is set to see the levels of 11630 and 11690 acting as resistance points. Supports come in lower at 11550 and 11480.
The Relative Strength Index – RSI on the daily chart is 59.5299. RSI has marked a fresh 14-period low which is bearish. Additionally, it also shows a bearish divergence against the price. The daily MACD stays bearish as it trades below its signal line. A black body appeared on candles and apart from this no major formations were observed.
The pattern analysis has showed a double top getting confirmed at 11760 level. This is a major resistance point for the markets as it took seven months to form and also witnessed NIFTY retracing from those levels again.
Speaking on broader terms, the present corrective behavior of the markets is likely to persist for some more time. We do not expect any major up-move to occur until the levels of 11760 is taken out comprehensively. Looking at the Brent prices along with the USDINR behavior over couple of days, we might see Rupee appreciating some more with the level of 68.90 acting as strong base. All this cumulatively do not work out much in favor of equities. While the markets are expected to extend its corrective move, a cautious view is advised for the day.
Milan Vaishnav, CMT, MSTA, Consulting Technical Analyst Member: (CMT Association, USA / CSTA, Canada / STA, UK) | (Research Analyst, SEBI Reg. No. INH000003341)