Though the equity markets on Friday ended the day with modest gains, we expect the markets to remain in a capped range on Monday. If we see some intermittent technical pullbacks, the overall bias would remain negative and the levels of 8,690 will act as stiff resistance to the markets. The opening is likely to remain modest but intraday trajectory that the markets form would dominate the trend for the day. Volatility cannot be ruled out.
For Monday, the levels of 8,655 and 8,690 will act as immediate resistance whereas the levels of 8,560 and 8,610 will act as supports. The RSI—Relative Strength Index on the Daily Chart is 41.7661 and it remains neutral as it shows no bullish or bearish divergence or any failure swings. The Daily MACD continues to trade bearish below its signal line.
On the derivatives front, the NIFTY October futures have shed over 9.92 lakh shares or 4.17 per cent in open interest. This shows some offloading of long positions in the markets.
Let us now have a look at pattern analysis. As mentioned on Friday, the NIFTY has formed a Descending Triangle Pattern on the Daily Charts. The technical structure was weak for the short term anyway and the geopolitical tensions aggravated the effect. The markets have clearly shown a downward breach from this descending triangle formation. It is also important to note that the neckline of 8,690 that the markets broke is also the 50-DMA. Therefore, even if we see
Therefore, even if we see technical pullback, this level will pose stiff resistance to the markets on its way up. We do not rule out any technical pullback but it becomes important to note that even with no geopolitical developments in the region, the technicals anyway remain bearish for the short term. Now, with any geopolitical tensions, if any, in the region, the negative effect may be magnified on the markets. In any case, highly cautious mood will prevail and the pullbacks will limit up to 8,690 levels.
The descending triangle pattern will fail only if the markets move past 8,690 levels comprehensively. Until then, all pullbacks and up moves will meet with selling pressure from higher levels.
(The author is CMT, Consultant Technical Analyst at Gemstone Equity Research & Advisory Services)