Thursday Set-Up: NIFTY Confirms The Inverted Hammer; Averts Major Weakness From Creeping In
The markets ended its 8-day losing streak and staged a sharp rebound and ended the day with decent gains. The markets witnessed a positive start to the trade, but it continued to resist to the 100-DMA which is presently at 10683 for major part of the session. The index struggled hard to move past this level, but it faced strong resistance near this level. In he last hour of the trade, NIFTY finally managed to cross this resistance and ended the day with gains of 131.10 points or 1.24%.
We expect a positive start to the trade and see markets continue with the follow up up-move on Thursday. Though the up-move in the initial trade cannot be ruled out, it would be important to see if NIFTY is able to move past levels which are important from the weekly charts point of view. By the time we end this week, it would be important to see if NIFTY manages to move past the 50-Week MA which currently stands at 10790.
With the current up move, the markets have averted a structural weakness from creeping in. Thursday is likely to see the level of 10820 and 10860 acting as resistance. Supports are expected to come in at 10680 and 10640 area.
The Relative Strength Index (RSI) on the daily chart is 45.8745; it remains neutral and shows no divergence against the price. The daily MACD stays bearish as it trades below its signal line.
A big white body emerged on candles. It is important as it has lent confirmation to yesterday’s formation of an Inverted Hammer that made a case of potential bullish reversal.
The pattern analysis shows that though NIFTY showed a marginal breach of a major pattern on the daily charts, it has crawled back inside this broad range. It is all likely to move higher towards its 50DMA and 200DMA levels.
Unless the NIFTY breaches 10640 again or slips below 10680 at Close level, it has marked a potential bottom for itself. Though the up-moves from hereon may not be smooth for the index as it still has critical resistance to cross, it has at least as of now, averted any immediate danger to breaking down. We recommend continuing to chase momentum, but profits may still be protected at higher levels. It is suggested to refrain from shorts and approach markets with positive outlook so long as the zone of 10640-10680 is held by the markets.
Milan Vaishnav, CMT, MSTA, Consulting Technical Analyst Member: (CMT Association, USA / CSTA, Canada / STA, UK) | (Research Analyst, SEBI Reg. No. INH000003341)