Monday Likely To See A Muted Start To The Day; These Levels Likely To Halt Upsides, If Any
Friday was a session which again saw short covering in the second half of the trade which took the markets into green before ending the week on a flat note. After seeing a modestly positive start, the markets slowly drifted and pared all its gains by late morning trade. It drifted further in the negative zone and spent some time in a defined range. The index witnessed some sharp recovery from the lows of the day following some short covering. The headline index went on to end the day with gains of 46.75 points (+0.40%).
The coming week is a truncated one and no major upsides are expected to come in. Monday is once again likely to see a muted start to the trade and will see all upsides, if there are any, finding very stiff resistance in the 11710-11760 area. The volatility, though in a moderate form, has returned with the VIX inching slightly higher to end at 20.9975.
Monday is likely to see the levels of 11710 and 11760 posing stiff resistance to any upsides. Supports come much lower at 11550 and 11480 levels.
The Relative Strength Index (RSI) on the daily chart is at 62.3328. It does not show any divergence against the price over the previous 14-day period. However, if visually inspected, it is seen negatively diverging against the longer price action. The daily MACD is bearish and it trades below its signal line.
The Bollinger bands are presently over 38% narrower than normal. Though they do not suggest any likely definite price move, but narrower the bands get, the NIFTY will remain prone to sharp moves on either side.
The initial morning trade is likely to see volatile reaction to IT stocks following earnings from TCS and Infosys. Besides this, we expect the action to remain positive within the defensive sectors. Broadly speaking, the favorable price action is likely to remain containing within few sectors and the session is likely to remain highly stock specific. Unless the markets show some cleansing in form of even mild corrective activity, it remains greatly vulnerable to profit taking from higher levels. We reiterate maintaining highly cautious outlook on the markets for the day.
Milan Vaishnav, CMT, MSTA, Consulting Technical Analyst Member: (CMT Association, USA / CSTA, Canada / STA, UK) | (Research Analyst, SEBI Reg. No. INH000003341)