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  • Milan Vaishnav, CMT, MSTA

Outlook For Friday: NIFTY's Action Against This Level Critical To Watch; Volatility May Stay

In a session that was marred with high volatility, the Markets continued to slide and ended the day with a modest loss while bank stocks continued to underperform the frontline index. The start of the trade remained negative, and one point, the NIFTY, lost nearly 100 points from its previous close. The markets recovered in the early afternoon trade only to give up once again. After oscillating in a 100-point range, the headline index NIFTY ended the day with a net loss of 45.90 points (-0.40%).

For the second day in a row, the NIFTY bounced back after taking support at its 200-DMA, which presently stands at 11258. For Friday and subsequent days, the price action in NIFTY against the critical support level of 11258 will be extremely crucial to watch over the coming days. It would be imperative for the NIFTY to continue to keep its head above this level and consolidate, failing which we will see more weakness creeping into the markets.

Friday is likely to see some volatile start to the day, and we may see NIFTY attempting to show some technical pullback given the short positions that exist in the markets. The levels of 111350 and 11435 will act as resistance, while supports will come much lower at 11250 and 11165.

The RSI on the daily chart is 53.53; it stays neutral and does not show any divergence against the price. The daily MACD continues to remain bullish while trading above its signal line. A spinning top occurred on the candles, and this shows the indecisive behavior of the market participants.

The pattern analysis shows that the NIFTY has given up just short of 50% of the gain that came from the sharp up-move following the corporate tax cut announcement. It has taken support twice at the 200-DMA, and this level will continue to remain a very important level to watch over the coming days.

Some amount of shorts continue to exist in the system. Irrespective of this, the 200-DMA level will be critical over the coming days. For the NIFTY to avoid any more weakness, it will have to keep its head above 11250-level. The Markets are likely to continue consolidating in the broad range; it will continue remaining vulnerable at higher levels. We reiterate to abstain from creating heavy exposures on either side and remain highly stock specific. A cautious approach is advised while vigilantly protecting profits at higher levels. Markets may take some time before it makes any sustainable directional call.

Milan Vaishnav, CMT, MSTA, is a Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at milan.vaishnav@equityresearch.asia

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