Set-up For Monday: Stable Start Expected; Caution May Weigh On The Markets
Despite the over 120-point recovery from the lows of the day, the Friday’s session saw the markets ending in the red for the sixth day in a row. After a flat start, the index remained under sustained downward pressure. It continued steadily losing ground, but it was the second half of the session that saw recovery coming in. The NIFTY rebounded from the lower levels and coming off over 120-points from the lows, it settled the day losing 21.65 points or 0.20%.
As evident from the F&O data, the recovery was fueled by short covering. In the process, the NIFTY has held on to its 100-DMA at close which is presently at 10694. Going ahead, this level will be key support level for the NIFTY at closing basis. With no structural breach as of now and with the index clinging to its pattern supports, we can expect a recovery to continue. A stable opening is expected on Monday and some follow-up move can be expected. However, at the backdrop, there is also a possibility of the markets exhibiting a cautious sentiment following likelihood of India retaliating to the Pulwama tragedy.
Monday is likely to see the level of 10760 and 10820 acting as immediate resistance zone. Supports come in at 10680 and 10620 level.
The Relative Strength Index – RSI on the daily chart is 42.3428 and it remains neutral and shows no divergence against the price. The daily MACD is bearish and trades below its signal line. On the Candles, a black body occurred. This candle resembles the one with a long shadow. Though this formation is not so classical in nature but potentially, it can mark a short-term bottom for the markets. This would require confirmation on the following day.
Overall, after the rebound that we saw in the second half of the trade on Friday, the markets have yet not shown any structural breach. It continues to remain in a broad range and defending the level of 100-DMA at close will be important. Some caution may overweigh the sentiment the markets and we may see it continuing to remain range bound. While not ruling out some possibilities of the up move continuing at least in the initial trade, we reiterate staying away from shorts and adopting a highly selective approach in the markets while keeping exposures at modest levels.
Milan Vaishnav, CMT, MSTA, Consulting Technical Analyst Member: (CMT Association, USA / CSTA, Canada / STA, UK) | (Research Analyst, SEBI Reg. No. INH000003341)