Monday Likely To See A Soft Start; Avoid Using Dips To Make Aggressive Purchases
The equity markets on Friday ended the week on the extremely volatile note as the headline index NIFTY swung over 200-points after finishing with a modest loss. The Nifty Bank Index saw a wild move on similar lines and moved in over 1100-point range. This quantum of volatility was due to the way the markets reacted to the portfolio allocation to the new set of cabinet ministers. Despite such a volatile move, the NIFTY saw some recovery and ended the day with a modest loss of 23.10 points (-0.19%).
Speaking on the technical terms, the zone of 12000-12040 has reinforced itself as a critical resistance area following Friday’s trade. To add to this, we might have markets getting sentimentally negative following weaker GDP data and soft global set up. We expect the markets to see a sober start and find resistance after each up move that it may get. Overall, the broader sentiment may remain broadly cautious and mildly negative.
Monday is likely to see the levels of 11975 and 12040 acting as strong resistance points. Supports come in much lower at 11850 and 11780.
The daily RSI is 61.6101; it stays neutral and shows no divergence against the price. While daily MACD stays bullish and trades above its signal line, it is seen narrowing its trajectory. A black body emerged and apart from this, no other formation is observed on Candles.
The pattern analysis of the daily chart reveals that the NIFTY has not achieved any conclusive breakout even after it marked incremental highs on a closing basis. The 12000-12040 have now become an intermediate top for the markets. These are the levels that the NIFTY will have to breach on the upside to get any sustainable breakout comprehensively.
The Bollinger bands are now over 74% wider than usual, and this may prevent any significant sustainable up-move for the NIFTY. Therefore, the probability of the index remaining or returning in its typical range has increased. This may also lead to some corrective activities in the market.
It is very likely that the out-performance in the stock may remain highly specific and limited to individual pockets of the market. We recommend not using dips to make aggressive purchases as the technical texture of the markets may change over the coming days. While keeping exposures at very modest levels, a cautious outlook 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)