Up-moves To Remain Vulnerable To Profit Taking Bouts; Buying On Dips Should Be Avoided
Much on the expected lines, the markets underwent a corrective session as it ended the day with a loss. Though there were no deep cuts, the corrective intent was severe as the NIFTY witnessed a gap down opening and never made any significant attempts to recover all throughout the session. After remaining in a downward trajectory for the entire day and post witnessing a minor up move towards the end, the benchmark index NIFTY 50 settled the day with a net loss of 102.65 points or 0.90%.
There are enough indications that the corrective bias is likely to persist for some more time. Though a quiet start to the trade is expected, markets are widely extending its downside. Any upsides, if there are any, will see inviting a profit taking bouts from higher levels.
Tuesday is likely to see the level of 11400 and 11465 acting as immediate resistance area while supports are expected to come in at 11310 and 11220.
The daily RSI is 63.1882; it has just crossed below from a topping formation which is bearish. RSI does not show any divergence against the price. The daily MACD remain bullish but it is seen narrowing its trajectory sharply.
On the Candles, a falling window occurred. This usually results out of a gap down and often results into continuation of the bearish trend. The two candles preceding the falling window were black, which makes this pattern even more bearish.
The pattern analysis of the daily charts shows NIFTY achieving implied measurement targets following its breakout from a formation. It then exhausted its up move and is now showing clear corrective intent.
All in all, even if we witness some up moves during the day, we strongly suggest ignoring such up moves. Any upsides should be used to protect profits at higher levels. Rotation is expected to be visibly seen in stocks that are defensive in nature and in those which perform well if the Rupee weakens. Apart from this, no visible out-performance is expected. While staying away from buying on dips, a very 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)