The markets on Wednesday continued to surge and ended the day with decent gains but also showed some fatigue at higher levels as it came off from its intraday highs. On Thursday, though we can expect markets to remain stable, however, some signs of fatigue will be clearly visible in the markets today. The levels of 8819.20 will be important to watch out for and there are chances that some consolidation happens around these levels.
For Thursday, the levels of 8,820 and 8,855 will be critical levels to watch out for and are likely to act as immediate resistance for markets. The supports will come in at 8,750 and 8,725 levels. The RSI—Relative Strength Index on the Daily Chart is 65.0915 and it has reached its highest value in last 14-days which is bullish. It does not show any bullish or bearish divergence. The Daily MACD has reported a positive crossover and it is now bullish as it trades above its signal line.
On the derivative front, the Nifty September futures have added over 25.72 lakh shares or 8.45 per cent in open interest. If we have look at pattern analysis, after remaining in upward rising channel from February lows and after making 8,728 as its immediate high, the markets had turned sideways and had been consolidating in a capped range through major part of August. In previous two sessions, the markets have achieved a break out on the upside and Wednesday’s gains have confirmed that breakout. However, given the fact that equity markets have risen nearly 215-odd points in the last 3 sessions, some amount of consolidation cannot be ruled out. In any case, the levels of 8,700-8,728 will continue to lend crucial support to markets.
There are chances that some amount of consolidation happens at higher levels but it would be healthy for markets and the undercurrent continues to remain buoyant. We will see some shift in the sectoral performance but the inherent buoyancy will be maintained. Once again while avoiding any blanket shorts, all consolidation and minor or intermittent dips should be utilised to make selective purchase.
(The author is Milan Vaishnav, CMT, Consultant Technical Analyst at Gemstone Equity Research and Advisory Services)