Mildly Positive Start To The Trade Expected; Critically Imp To Maintain Gains To Avoid Weakness
The markets witnessed a thoroughly disappointing session on Friday as it failed to capitalize on the buoyant opening and ended the day with losses. NIFTY saw a smart opening following global stability but once again found stiff resistance in the 10900-10950 zone. After testing 10931.70, the index starting to retrace gradually but steadily. By late afternoon trade, it gave back all its gains and it slipped in the negative. After coming off 150-points from the highs, the NIFTY settled the day with a loss of 69.25 points (-0.64%).
The Indian markets have under-performed the global and Asian peers off late as it has shown distinct weakness despite Asian and other global markets remaining stable and positive. Monday begins an eventful week for the markets and as of now, the NIFTY has held its 50-DMA which is 10780. The zone of 10780-10837 remains a very important support zone as it has all the key DMAs (50, 100 and 200) in this range.
Global markets remain steady and this may again give Indian markets a positive start to trade on Monday. However, post the expected positive opening, now it will be critically important for the markets to sustain at higher levels to avoid any major weakness from creeping in. The levels of 10840 and 10900 will act as immediate resistance are while supports are expected to come in at 10750 and 10680 zones.
The RSI on the daily chart is 47.1508 and it has marked a fresh 14-period low which is bearish. It also shows a bearish divergence as the RSI has marked a fresh 14-period low while NIFTY has not. The daily MACD stays bearish while it trades below its signal line. An engulfing bearish candle has emerged on Candles. Since it has emerged during a downtrend, we can expect a potential reversal from these levels. However, a confirmation is needed for this on the next bar.
Overall, the weekly charts of the NIFTY remain intact with the index above its critical levels. However, on the daily charts, the markets are showing mild cracks. It will be important for the markets to reverse from these levels to avoid any short-term structural weakness. The F&O data which shows addition of shorts as reflected in the shrinking premium shows possibility of markets taking support at current levels. With no structural breakdown yet on daily chart, we continue to reiterate avoiding shorts at current levels. A highly cautious and stock specific approach 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)